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MALTA - A rocky relationship between computer chip makers Intel and Advanced Micro Devices took a cordial turn on Thursday as the two companies announced an agreement aimed at settling all of their lingering legal disputes.

The accord will force Intel to give up claims that a patent license sharing agreement was breached when AMD partnered with an Abu Dhabi investment company last year to create GlobalFoundries, the firm now building a $4.2 billion computer chip factory in Saratoga County.

The agreement also forces Intel to pay AMD $1.25 billion and sets new rules for their business model going forward.

Intel officials argued the joint venture violated the decades-old technology-sharing agreement it had forged with AMD because only company subsidiaries were entitled to have access to the proprietary technology they share.

The argument threatened GlobalFoundries' financial future because it put into question whether or not they would still be able to make AMD computer chips that employed technology covered by the agreement.

Because the technology is used in about 90 percent of all computers, its continued use was seen as vital to the

future viability of GlobalFoundries' factory now being built at the Luther Forest Technology Campus in Malta.

A new license-sharing agreement forged between Intel and GlobalFoundries - which will also cover some proprietary manufacturing techniques employed by each company - now replaces the previous pact between AMD and Intel, officials said.

GlobalFoundries spokesman Travis Bullard described the deal as a big win for the computer chip maker that will allow officials to focus their efforts on the company's core mission: attracting additional customers to use their production facilities.

AMD will be the largest customer serviced by GlobalFoundries' factory when it comes online in 2012,

and the company is now looking to get other computer

chip designers in need of production facilities to sign on.

"Nothing has fundamentally changed, but it's good to have this all settled," Bullard said. "The field for us is now wide open."

Under the terms of the deal, Intel will be prohibited from offering computer makers incentives for agreeing to forego AMD products - something they've been criticized for doing across the globe in order to gain dominance in the market.

AMD spokesman Drew Prairie said the new provisions will be a benefit for consumers going forward because it will level the

playing field for Intel's competitors.

"We needed ground rules for how the market was going to operate moving forward and now we have that," he said. "What that means is that our products will be competing solely on their merits, and anytime that happens it's a win for the consumer."

Complaints about Intel's sales methods were included in the anti-trust lawsuits AMD had filed in U.S. federal court and in Japan, but AMD will now drop those suits.

Similar concerns were raised as part of a case built by New York Attorney General Andrew Cuomo, who last week filed an anti-trust lawsuit against Intel for allegedly using "illegal threats and collusion" to dominate the computer chip market.

Officials with the Attorney General's Office said Thursday that the agreement would have no impact on the state's lawsuit, however.

A similar case also remains unsettled in Europe, where Intel is appealing a May ruling by the European Commission, which levied a $1.5 billion fine against them for violations of anti-trust laws.

News of the agreement sent AMD's stocks upward on Thursday.

AMD shares had climbed $1.16, or 21.6 percent, to $6.47 by mid-afternoon while Intel shares declined less than a half-percent, to $19.68 a share.

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