Intel, STMicroelectronics end legal feud

The two companies announced a broad, five-year patent cross-licensing deal today, meaning that each company doesn't have to worry about the possibility of infringing on the other company's patents. The lawsuits between the two companies will be dismissed, the companies said.

The agreement opens the way for STMicroelectronics to build products for smaller or start-up companies working on Intel-compatible chips, according to Dean McCarron, an analyst with Mercury Research, who noted that STMicroelectronics may have a tie-in with Transmeta, a Silicon Valley company with patents for a chip-software system that could emulate processors made by Intel as well as other companies.

"It just made a lot more sense between the companies to get these things settled and move on," McCarron said.

The legal wrangling originated with STMicroelectronics' fabrication of Cyrix chips, which used to be a more serious competitive threat to Intel's product line, McCarron said. However, STMicroelectronics no longer manufactures the Cyrix chips; IBM took over that work, so STMicroelectronics "no longer was enabling substantial competition to Intel," he said.

"Intel was not thrilled about the competition" from Cyrix chips, McCarron observed. "Ultimately, the market situation has changed, and it's made a lot of these issues between Intel and STMicroelectronics largely a moot point."

STMicroelectronics "still participates in the processor market, but it's doing so more on the basis of embedded microprocessors and the lower-end, sub-$1,000 market. They're not competing head-to-head with Intel they way they were in the early days of Cyrix," McCarron said.

The legal maneuvering between Intel and STMicroelectronics is characteristic of the intellectual property minefield that microchip companies must navigate.

It's essentially impossible to build a complex microchip without running into other company's patents--especially IBM, which holds the patent for the computer, and Texas Instruments, which holds the patent on the chip.

"These big companies often do [patent*#93; cross-licensing. Ultimately it's in the best interests to play along with each other rather than be having these lawsuits," he said.

STMicroelectronics and Intel apparently agree.

"I am pleased that it ends years of costly litigation and provides the opportunity for our respective companies to work more closely together in the future in many areas of joint interest," said STMicroelectronics chief executive Pasquale Pistorio in a statement.

Intel chief executive Craig Barrett noted that the agreement "gives engineers from both Intel and ST design freedom."

When STMicroelectronics (then called SGS Microelectronics) made Cyrix chips, Intel sued Cyrix, arguing that Cyrix, which designed the chips, wasn't protected because STMicroelectronics, which actually made the chips, had patent cross-licensing agreements. But the legal upshot of that lawsuit was that Cyrix was in fact protected by manufacturing chips at a "protected fab." When National Semiconductor took over Cyrix and shifted production to an IBM foundry, Intel didn't make a fuss, McCarron said.

Intel--which has cross-license agreements with IBM--didn't want to tangle with IBM. In terms of patents, Intel and IBM are both armed with the intellectual property equivalent of nuclear weapons. "They're superpowers, and they have nuclear weapons, but IBM has a lot more of them," McCarron said.

Until last year, STMicroelectronics, based in Europe, was known as SGS-Thomson Microelectronics.