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Exponential patents on auction

Friday's normally mundane auction of 45 microprocessor patents has drawn a great deal of interest because the technology could hold the key to loosening Intel's grip on the market.

The next two weeks may be crucial to Intel's hammerlock on the microprocessor industry.

During this time, an auction will be held for 45 microprocessor patents owned by Exponential Technology. The normally mundane event has drawn a great deal of interest because the technology on offer could hold the key to loosening the chip giant's grip on the market.

Exponential's patents could supersede Intel's patents for the upcoming Merced chip, Intel's next-generation 64-bit processor developed jointly with Hewlett-Packard.

As such, the Exponential patents have become the Maltese Falcon of the semiconductor world, a work from a defunct company that fate has suddenly made valuable. If Intel wins the patents, it would be able to quell any potential conflicts over its rights to technology used in Merced. But if the patents fall to a competitor, the rival could potentially use them as a bargaining chip against Intel, or build a Merced-like clone.

Former Exponential employees, moreover, are interested in the auction--and its potential windfall for the shuttered company--because they are still owed approximately $1 million in back pay.

A first auction round will be held Friday, August 15, said John Montgomery, an attorney at General Counsel Associates and the lawyer for Exponential. High bids from the first round will then be submitted for a second round of bidding scheduled for Friday, August 22. Bids will be sealed; potential buyers will also have the option of bidding on some or all of the patents.

Intel, as well as Digital, Advanced Micro Devices (AMD), Cyrix, and close to 15 other semiconductor companies are expected to bid on the patents. Companies would not confirm whether they will participate in the auction, and Montgomery declined to provide names.

Exponential filed in February 1995 for several patents for a chip that works with both CISC and RISC instructions, said former employees at the company. CISC instructions are understood by chips based on Intel, and RISC instructions lay behind chips running PowerPC chips. By being able to handle both, the universe of programs that work on the chip is greatly increased.

The U.S. Patents and Technology Office issued a number of patents for Exponential between January and July of 1996.

Meanwhile, Intel filed similar patents for understanding both RISC and CISC instructions in its upcoming Merced processor in 1995. These patents were awarded in 1997.

While Intel likely did not have any knowledge of the Exponential patents, the earlier Exponential patents exist as "prior art" of Intel's patents, explained Rich Belgard, a consultant with the Microprocessor Report newsletter.

Under the prior art doctrine, Intel cannot enforce its patents if they cover substantially the same operation as the Exponential patents do. And, according to Belgard, the way in which the two patents dictate how a single chip would read the two instruction sets are close.

Intel likely wants the patents to fend off any legal complications, he said. Digital and the other Intel competitors are probably interested in the patents because they could give them leverage over Intel.

"AMD could use them as a bargaining chip," Belgard said.

Exponential, which formerly made high-performance PowerPC processors, had to close down its operations because Apple Computer earlier this year decided not to ship a box that uses Exponential's X704 processor.

When the company stopped operations, employees did not receive final paychecks or vacation pay. Stephanie Dorris, Exponential's CFO, said that they will be lumped in with the creditors to be paid off with the proceeds of the auction. The company's debt, she added, ranges between $5 million and $15 million--she would not provide closer estimates.

Certain emails indicate that anxiety and frustration are mounting. Emailed notices--one supposedly from former CEO Rick Shriner--from former Exponential executives to employees said that there will be an accounting in September.

Intel is an investor in CNET: The Computer Network.