February 3, 1998 1:35 PM PST

Intel to let Cyrix copy Pentium II

Cyrix (CYRX) is free to make its own chips based on the Pentium II design under an agreement between parent company National Semiconductor (NSM-AL) and Intel (INTC).

Intel and National Semiconductor have settled an


n: The process of making a clone product by analyzing a competitor's finished version, without any knowledge of how the original was developed. Chipmakers have made Intel-compatible products with reverse engineering in a "clean-room" environment, implying that they knew nothing of the original design. The legality of the practice is unclear, as courts have yet to make a definitive ruling on the issue.

existing patent infringement lawsuit and extended a broad cross-licensing agreement that will allow for the Pentium II duplication.

In essence, the settlement means that Cyrix will have access to all of Intel's patents and that Intel cannot sue National or Cyrix for infringement, said Alan Bernheimer, a National spokesman. "Neither company can sue the other for patent infringement," he said.

"This is preferable to going to court," said Chuck Mulloy, an Intel spokesman. "This extends what is already a longstanding licensing agreement that goes back to 1976." (Intel is an investor in CNET: The Computer Network.)

The upshot is that Cyrix can make Pentium II chips without fear of legal reprisal through by developing their own Pentium II technology in-house through a process known as "reverse engineering."

The cross-license does not cover all of the intellectual property involved in designing a Pentium II-style chip. Intel protected many of the design features by designating them as trade secrets. Trade secrets are not covered by the cross-license agreement and are generally never disclosed.

In reality, however, little legal protection is attached to them. Competitors can reverse-engineer technology and adopt it with far less fear of incurring legal liability. Reverse engineering entails cloning a product from scratch without any knowledge of how the original product was developed and engineered.

While Intel executives have said that reverse engineering the chips will prove difficult, Bernheimer and others at National disagree.

"We believe we have the capability to make a Slot 1 processor," he said. "Slot 1" refers to the design of the package that is part of a Pentium II.

Steve Tobak, vice president of corporate marketing at National, said that reverse engineering won't be difficult. "Good design firms are capable of reverse engineering almost anything," he said. "Trade secrets present a minor barrier."

Tobak added that the new agreement goes beyond the year 2000, which is when the original Intel-National cross-license was to expire. "This extends well beyond that," he said.

No payment was made as a result of the settlement and no further terms were discussed. The lawsuit was originally filed in May. Cyrix filed the suit, but Intel filed a counterclaim.

Despite the victory, National earlier in the week admitted that it missed its revenue and earnings targets for the quarter because of manufacturing shortfalls with Cyrix. Specifically, Cyrix could not meet demand for 233-MHz versions of the MediaGX processor.

The company suffered an additional blow in January when Compaq announced new low-end computers using chips from Advanced Micro Devices. As a result of that deal, Compaq stopped using MediaGX chips in one of its Presario desktop models.

Compaq was one of the biggest customers for the MediaGX last year. In fact, many credit the Presario 2000 series, the first Compaq to utilize a MediaGX, with kicking off the sub-$1,000 computer craze.

Compaq currently uses a MediaGX in a mobile Presario.

 

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