By Jo McIntyre
Small Times Correspondent

Feb. 20, 2002 — Microvision Inc. continues to accumulate new patents for its MEMS-based retinal scanning, microdisplay and image capture technologies, and now has 55 of them in its patent portfolio.

“We have a significant lead within this display space,” said Steve Willey, executive vice president responsible for technology and products in the Bothell, Wash.-based company.

The company uses MEMS technology for output (display) and input (image capture) devices and has a total of more than 150 patents in the bag and pending. It is not just the patents, but how they all function together that is important, he said.

“At some point you corner an industry. We also have more (patent applications) on the way. These are large numbers. There is value in getting critical mass.”

With more than 90 additional U.S. patents pending, “they already have a substantial patent portfolio to protect their technology in the MEMS area,” said senior vice president and equity analyst Peter Jacobs of Wells Fargo Securities LLC in Seattle.

The company is locking up a competitive lead in patents that apply specifically to virtual retinal display products, a strategy that fits in with what Microvision is already doing — developing microminiature optical scanning technology, Jacobs said.

“Building an unassailable patent portfolio is an important component of our overall growth strategy and adds substantial value to the company,” said Casey Tegreene, Microvision’s chief technology officer and intellectual property counsel, in a statement.

The aggressive patenting strategy is also intended to block potential competitors, Willey said.

Microvision’s MEMS and virtual retinal display technologies work on applications that span several different industries. The company’s components can be used in everything from portable display devices for cell phones to helmet mounted displays.

In spite of all this patent progress, the company is still in the prototype stage, with systems for medical, industrial and military applications out now. However, 2002 and 2003 should be years in which some of their products will actually enter the market, Jacobs said.

He sees good possibilities in two main areas: the recently released Nomad personal display system that could be used in industrial and commercial applications. It could also be modified for medical applications.

The Nomad, was designed with mobile workers in mind — like linemen, mechanics and technicians working in fiber optic vaults. Using the “augmented vision” offered by the Nomad, the company says, mechanics can increase their efficiency, pilots can fly more safely and surgeons can operate more effectively. The Nomad uses MEMS technology in a scanning chip that directs a tiny ray of light to write images and other information directly onto the wearer’s retina.

The scanner, which is attached to a device worn on the head like a miner’s helmet, is about the size of a one-inch chocolate square and drops down in front of one eye. The wearer can see through the scanner screen, which produces an image bright enough to be seen in full daylight.

“There is a real shortcoming in display devices used in the military arena,” Jacobs said. All currently use either CRT (cathode ray tube) or LCD (liquid crystal display) technology. Neither has the transmitting ability needed to be effective in an environment where there is a lot of light.

One barrier to breaking into the market in a significant way is the long time customers take to decide to adopt technology and to trust it.

Markets the company has targeted are substantial in size — federal government or surgery — so it won’t take a lot of penetration to have a substantial impact on Microvision sales. Brand-new technologies sometimes require high value products to pay for development costs and to recover capital investments.

Competitors in civilian markets include Three-Five Systems Inc. of Tempe, Ariz. and MicroOptical Corp. of Westwood, Mass. Those companies’ products use mirrors rather than retinal scanners. Competitors in the military market are Kaiser Group Holdings, Kopen and Honeywell.

Jacobs thinks the company eventually will get a foot in the door of the military because it offers a product that meets military requirements for fidelity, luminance and color capabilities.

“We should start to see Microvision begin to ramp up low rate production of their Nomad system for commercial and industrial applications in 2002. It will be interesting to see customers’ reaction to the products and whether they reorder,” he said.

In its financial report for the third quarter ended Sept. 30, 2001, the company reported a consolidated net loss of $8.2 million or 68 cents a share compared to a net loss of $7.7 million or 65 cents a share for the same period in 2000.

Revenue for the third quarter of 2001 was $2.4 million compared to $2 million for the same period in 2000. Revenue is primarily from development contracts from the U.S. Department of Defense and medical researchers.

A fourth-quarter financial report for the 170-employee company is expected soon. Microvision is publicly traded on the Nasdaq stock market.


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