AMD: The 'Guts of This Case' Against Intel are Intact

Making the most of the single avenue of exploration US Federal District Judge Joseph A. Farnan left open last September, AMD is proceeding in its antitrust suit against Intel by arguing that nothing in the judge's most recent order explicitly prevents it from discovering evidence of misconduct. That evidence could later be applied, AMD says, to its claim that Intel irrevocably harmed its business in the US through exclusivity deals it allegedly made with retailers in Germany.

"It follows as the day does the night," states AMD's reply to Intel's latest opposition brief, filed with the court yesterday, "that proving harm to a rival's export business requires a showing of interference with the rival's actual or prospective foreign customers (since sales to those living here hardly qualifies as part of the U.S. export trade). And even Intel cannot conjure a way for AMD to prove interference with its foreign customers other than by engaging in foreign conduct discovery."

AMD may need all the poetry it can muster to counter Judge Farnan's September partial dismissal order, which cast aside a good portion of the company's original arguments. Under US antitrust law, US companies can only seek redress for conduct from a monopoly player -- which AMD claims Intel to be -- which directly, negatively impacts the company's domestic commerce. The only exception in the Sherman Antitrust Act and in laws that follow, pertain to export business where the customers are abroad, but the revenues are earned at home.

The judge's order made that indisputably clear: "Because AMD has not alleged that Intel's conduct resulted in a substantial and direct domestic effect," Judge Farnan wrote, "AMD cannot demonstrate that any such domestic effect gives rise to its claim. The [Foreign Trade Antitrust Improvements Act of 1982] requires a plaintiff to allege that its claims were directly caused by the domestic effects of the conduct and not the foreign effects...In this case, any alleged harm suffered by AMD has been directly caused by the foreign effects of Intel's alleged conduct, namely lost foreign sales."

In an unusual inclusion for a legal brief, AMD attached a graph showing (presumably) lost market share in the Japanese x86 CPU market over a 30-month period, dropping from a 26% share in Q3 2002 to a 10% share in Q4 2004. Other figures and citations were included in the version of the brief filed with the court, that were redacted from the publicly available version.

It's those lost foreign sales that compelled AMD, the company claims, to retool its Austin, Texas, fabrication facility to produce flash memory -- a lower margin business -- and not CPUs, due to lower demand for K7 and other CPUs from foreign markets. "With Intel's foreign discovery vault still sealed," AMD writes, "this is just a taste of what is likely to be found.

"And while Intel makes sweeping representations as to the expansive discovery it still plans to make respecting plans to make respecting plans, forecasts, and pricing in foreign markets, Intel does not dispute that it has pulled off the table all customer-related material that would corroborate AMD's charge that it has bullied or bought agreements from foreign microprocessor purchasers not to do business with its only competitor - the guts of this case."

To make that case stick, however, AMD is making a big gamble by saying not that the judge was necessarily wrong, but that what he said didn't really apply to this case.

"As to [Intel's] FTAIA argument, the harms AMD alleges to its export business resulted directly from Intel's foreign misconduct," reads AMD's reply brief yesterday. "That renders wholly inapplicable Judge Farnan's September ruling, which held that Intel's interference with AMD's ability to sell microprocessors to foreign customers did not 'directly' harm AMD's domestic business with U.S. customers because the causation chain had too many links to satisfy the FTAIA's 'directness' requirement."

Later, though, AMD's brief takes a very dangerous turn, arguing a point that the Judge may already have rejected: "Nothing could be more directly connected than interference with a competitor's ability to deal with its foreign customers and the resulting loss of export sales to those customers...This is what AMD alleges."

With that die having been cast, the parties in the case can now let the burning sensation linger in their bellies over Thanksgiving, as they prepare for the formal trial itself, which is due to begin in a mere 29 months.