CoreTrace will show up at DEMOfall 08 with a new twist on the old antivirus problem.

Catching viruses attacking your home computer used to be a matter of matching patterns. If an antivirus program recognized a virus or a pattern of attack, it shut it down. Finding known bad programs was known as a “black listing” approach because the software stopped such programs from operating.

But now there are millions of new malware attacks each year, so that method isn’t working as well. The best way to stop those attacks is now to “white list” known programs that are allowed to execute on a computer. There might be just 20 or so approved applications running in corporations.

But the trade-off is that a “white list” approach essentially locks down a computer so that it isn’t as flexible as you want it to be. CoreTrace hopes to solve the trade-off between security and flexibility with its Bouncer 4.0 antivirus appliance.

Toney Jennings, president and chief executive of CoreTrace, said that the new software includes “Trusted Change,” which means that the software is flexible enough to allow IT managers to approve changes in allowed behavior on a computer. You can, for instance, allow Citrix Systems or WebEx software to initiate sessions that require interactivity, or ActiveX controls. But you don’t have to allow all ActiveX controls, since that’s a common vehicle for malware.

This approach is flexible enough to allow a number of the safer web-based applications to run, once they’ve been vetted, while prohibiting users from using unsafe programs. The software (delivered in a hardware box) can also be configured to allow certain programs stored on a corporation’s network drives.

The Austin, Texas,-based company was founded in 2001 by antivirus expert Dan Teal, who is chief technology officer. It raised an $8.2 million first round of funding in October, 2007 from Fund Ventures in Austin and Venrock. It launched its first products in the first quarter of 2008. It has 24 people. Jennings said that the company might start looking for a new round of funding.

Competitors include big rivals such as McAfee and Symantec as well as smaller companies in the white-listing business, including Lumension and Bit9.

CoreTrace’s software was the only one to stop all virus attacks in the “Race to Zero” competition at the recent Defcon conference in Las Vegas. The software costs $50 per desktop.

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