AMD Latest in Intergraph Quandary

AMD has become the latest computer parts manufacturer to
settle its patent litigation with Intergraph.

The two companies announced Monday that they would put aside their
differences with regards to Huntsville, Ala.-based Intergraph’s Clipper
System and Processor patents. The patents relate to computer system memory
management technology.

Sunnyvale, Calif.-based AMD said it will pay
Intergraph $10 million, plus 2 percent of the profits from its microprocessor
sales for three years (2005-2007). The payments can’t be more than $5
million per year nor more than $25 million during the term of the payout.

“We are pleased to have resolved our patent issues with AMD. We believe
this agreement is in the best interests of our shareholders based on all of
the circumstances, including the scope of AMD’s alleged infringement and
damage base,” Intergraph president and CEO Halsey Wise said in a statement.

The case stems from Intergraph’s so-called “OEM case” against Dell, Gateway, and HP, including
its Compaq division. Intergraph has dismissed its case against Round Rock,
Texas-based computer maker Dell in exchange for a comprehensive licensing
agreement. Representatives with Gateway were not immediately available for
comment. An HP spokesperson declined to comment on pending litigation.

A U.S. District Court Judge recently ordered Intergraph, HP and Gateway
to consider mediation with a wrap up date of April 27. Intergraph Executive
Vice President of Corporate Development Reid French said it’s very possible
that the mediation would not work.

“Certainly litigation is used as a last result and we try to use
licensing as our first choice,” French told

While Intergraph started out in the hardware business, the company found
overwhelming competition as Intel came into power in the ’80s and ’90s. Now
the $550 million-a-year company relies on its visualization software to make
intelligent maps in 2D and 3D. While Intergraph accused Intel of encroaching
on its territory, French said others clearly were in violation but would not
specify whom.

“Ultimately these types of things are a board level decision and require
an analysis of the situation,” he said. “At this time, we have not announced
any additional litigation outside of what is currently in the courts.”

While there was no direct lawsuit filed by Intergraph, AMD filed its
preemptive legal strike back in January against Intergraph saying Clipper
technology was invalid or was not present in AMD’s chips. The settlement is
no admission of guilt, but it does speak to the growing number of computer
manufacturers that are paying Intergraph seemingly to keep out of court.

Take for example, Intel, which recently agreed to pay $225
million to Intergraph as part of its longstanding argument that the Itanium
processor contains Intergraph’s Parallel Instruction Computing (PIC)
patents. Even though a Texas court ruled the
technology was there, the two sides eventually settled out of court.

In September 2003, Texas Instruments settled
its “Clipper” lawsuit with Intergraph, electing to prepay the royalty as a
one-time, lump sum of $18 million.

French said Intergraph would continue to use the capital built up from
its IP licensing to continue to develop its software products.

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