COLORADO SPRINGS, Colo.—Ray Armstrong flips on an LCD screen attached to a microscope. Up pops an image of long rows of computer transistors from a chip below the lens.
Armstrong’s not designing this chip. He’s tracing it, mapping it, reconstructing it, layer by layer, at the painstaking rate of 12 to 15 transistors an hour.
“We can actually reconstruct the circuit,” Armstrong said.
The process is called reverse engineering—starting with the finished product and methodically tracking back to re-create the design. When he’s finished, Armstrong’s employer, Colorado Springs-based TAEUS International Corp., will be able to tell the client whether the chip infringes on its patents.
This sort of reverse engineering work is the core of TAEUS’ business, but company founder and CEO Art Nutter has much bigger plans for his 16-year-old firm. And he doesn’t exactly soft-pedal his vision: “We’re on a mission to change the world,” Nutter said.
From its start in Nutter’s garage in 1992—a $6,000 contract for AT&T was the company’s first job—TAEUS has steadily expanded its reach, offering reverse engineering and intellectual property consulting for companies involved in all kinds of fields: LCD TVs, medical devices, video games, catalytic converters, telephone networks, paints and coatings—even hot tubs.
“Anything that’s hot and cool, that’s what gets litigated,” said Matt Troyer, TAEUS’ vice president for online innovation.
TAEUS’ research often helps companies prove someone is copying their designs, or helps prove that they aren’t copying someone else’s.
“That’s what’s kept me around for 16 years,” said Jim Adams, TAEUS’ chief technology officer. “There’s always something new.”
Now, Nutter wants to move up the patent food chain by establishing a marketplace where companies can easily purchase the rights they need for their products, and where patent owners can painlessly license their work. Currently, Nutter said, a company looking for the rights to a patent won’t know who to call about licensing the design, or how much to offer for the work. There’s no middleman to connect the two sides, and it’s throwing sand into the wheels of progress, he said.
“I do believe it’s important for these things to get into people’s hands as fast as possible,” Nutter said.
Disputes over the most important patents, the top 1 percent to 2 percent, end up in high-priced legal fights.
That’s good for TAEUS’ business, Nutter said, but it’s inefficient and far too expensive for less-valuable intellectual property. Nutter said he believes his Global Patent Syndicate (GPS), launched last month, can change that.
“I’m saying I want to draw those transaction costs as low as possible so other people can benefit from (these patents),” he said.
It’s like the Multiple Listing Service real estate agents use, Nutter said. You want a three-bedroom, two-bath house on the west side for under $250,000? The MLS will come up with a list of possibilities. Likewise, someone looking for touch screen technology for smart phones could access TAEUS’ GPS database and find a list of applicable patents and prices.
TAEUS is looking to heavy hitters to launch its exchange, including General Electric, Sandia National Laboratories, Microsoft, Philips, Fujitsu and British Telecom, Nutter said. GE alone has more than 60,000 patents in its arsenal. TAEUS is also pursuing another avenue: bundling patents to give manufacturers one-stop shopping for specific technologies. Its first project is putting together an LCD screen package to sell to Chinese manufacturers.
Currently, many overseas manufacturers have the technical ability to create high-tech products like LCDs, but they don’t have the license agreements required to legally sell their products in the United States. By bundling together all of the intellectual property these companies need, Nutter said he believes more of those companies will comply with patent law so they can access the U.S. market.
“It does nobody any good to invest to manufacture something if you can’t sell it in the largest marketplace in the world,” he said.
TAEUS employs about 30 people in its offices in the north end of town, plus a handful more in Tokyo, London, Taiwan, Korea and Romania, and, from that first $6,000 contract, has grown into a $10 million-a-year business. “We’re not cheap,” Adams said. “People come to us when they know that (a job) is hard.”
Most of its employees, including Armstrong, the engineering program manager, are generalists, and only a small amount of electronics work is done in-house.
“It’s interesting to go into Best Buy and buy a $3,000 plasma TV and then take it apart so it will never work again,” Armstrong said. “They always ask, ‘Do you want the insurance on this?’ Ah, no, probably not.”
To delve into the nitty-gritty of often arcane patent fights, however, the company relies on a network of thousands of subject matter experts who do the research and, if necessary, testify in court about their findings.
Chris Brandin, a computer designer and technologist, has been one of the company’s on-call experts since the beginning, offering advice and testimony on the intricacies of microprocessor architecture and related fields.
“It takes a particular mentality,” Brandin said. “It’s not your typical high-tech job. There’s more time pressure than there is in a typical technical job. You’re dealing with lawyers and courts and things like that.”
The company name has an ironic origin: Nutter incorporated as “Intellectual Property Consultants Inc.” in 1993, which was often shortened to IPCI. Another company used the same initials, however, and in 1996 sued Nutter for trademark infringement. Nutter and his employees came up with TAEUS, which stands for “taking apart everything under the sun.”
Nutter, 49, remains the company’s sole shareholder, and has never taken on debt, preferring steady growth to a meteoric rise. If, however, the Global Patent Syndicate takes off, he said, it could “dwarf” TAEUS’ traditional business.
“If you get enough momentum in this thing, it will take off,” Nutter said. “There is no Wal-Mart in intellectual property. We want to become that.”
