Irvine Firm Had Struggled With In-House Power Business : Ultrasystems Loses License for Micro-Cogeneration

A San Diego County company has ended a licensing agreement with Ultrasystems involving the Irvine-based engineering and construction firm’s struggling business in micro-cogeneration power systems.

Design Systems Research and Development, a small energy-consulting company in Alpine, said Wednesday it has ended the 2-year-old licensing agreement. The license gave Ultrasystems worldwide rights to patented technology used in micro-cogenerators. The patents are held by Craig L. Linden, Design Systems’ president.

Micro-cogenerators are in-house power systems used in restaurants, hotels, laundries and other small businesses to supply electricity and hot steam or water from a single fuel source, such as natural gas. The systems are designed to reduce users’ total energy bills.

Linden said his company broke off the licensing agreement to “take advantage of the current marketing window of opportunity.” He said the company plans to market the technology itself or license it to “a firm that will commit more resources toward capturing market share.”

Russell L. Greengard, Ultrasystems senior vice president, called the license termination “very insignificant.”

Although Ultrasystems officials once held high hopes for micro-cogenerators, sales during the past two years have been disappointing and accounted for just a small portion of the company’s revenue, he said.

In March, Ultrasystems laid off 40 of 55 employees in its micro-cogeneration business in Orange County and San Diego. The company announced then that it would shift its efforts toward larger cogeneration units.

According to Greengard, the licensing agreement has been the subject of out-of-court arbitration proceedings begun last year by Linden against Ultrasystems and Micro Cogen Systems Inc., an Irvine-based subsidiary of Ultrasystems. Linden has accused Ultrasystems of breaching the agreement.

Greengard questioned the legality of Design Systems’ ending of the licensing agreement: “We’re not sure whether we’ll dispute it or go along with it.”

Ultrasystems’ decision to scale down its micro-cogeneration business followed its recent $89-million acquisition by Hadson Corp., an Oklahoma City-based natural-gas company.

Ultrasystems founder Phillip J. Stevens left the company after the acquisition and has become involved in efforts by the Sioux to regain a portion of the Black Hills in South Dakota.