Intel is accusing AMD of breaching the terms of the companies' cross-licensing agreement and threatening to terminate AMD's license in 60 days.

The filing alleges AMD broke the patent agreement when it created Globalfoundries, the $4.3 billion spin-off of its semiconductor production arm. Intel says it will terminate AMD's rights and licenses under the cross-licensing agreement in 60 days, unless the breach is not corrected.

AMD claims Intel has no right to terminate the rights, and says Intel did not abide by the terms of the cross-license provisions for resolving disputes arising from the agreement.

Furthermore, AMD says it will prove Intel fabricated the claim to distract attention from antitrust scrutiny it is currently facing around the world.

"Should this matter proceed to litigation, we will prove not only that Intel is wrong, but also that Intel fabricated this claim to interfere with our commercial relationships and thus has violated the cross-license," says Ruth Cotter, AMD's Director of Investor Relations.

Although AMD seems defiant and confident, any threat of legal action of such magnitude has the potential to gravely affect its stock price. This was demonstrated recently, when AMD failed to get enough stockholder support to push through the Globalfoundries spin-off deal. Although the deal was eventually approved next week, AMD's stock plummeted on the news, loosing 7.2 percent in a single day of trading.

Ever since the ATIC/Mubadala deal was officially announced late last year, there was a lot of speculation on whether it breached the cross-licensing agreement. Back then we were assured by AMD officials that there was no reason for concern, and that AMD planned to conduct the spin-off deal in accordance with the cross-licensing agreement.

At the moment Intel not commenting the issue, but we have no doubt this developing story will cause much controversy over the next few weeks.