Contract analysis

I.A. Engagement and Assignment

1. I, Dr. Lawrence Keating, was retained on August 5, 2024 by Calderwood & Harkness LLP ("C&H") on behalf of Optiwave Semiconductor Corp. ("OWS" or "Plaintiff") to provide expert opinions on patent damages in the matter captioned Optiwave Semiconductor Corp. v. Lumicore Technologies, Inc., Case No. 2:24-cv-00319-JRG, pending in the United States District Court for the Eastern District of Texas, marshall Division, bef

2. The scope of this Appendix D is to quantify the enhanced damages component attributable to Lumicore Technologies, Inc.'s ("Lumicore" or "Defendant") alleged willful infringement of the following United States patents (collectively, the "Asserted Patents"): (a) U.S. Patent No. 10,234,847 (the "'847 Patent"); (b) U.S. Patent No. 10,891,193 (the "'193 Patent"); (c) U.S. Patent No. 9,678,562 (the "'562 Patent"); and (

3. In preparing this Appendix, I have applied principles of economics, finance, and accounting to the facts and evidence available in this case in order to calculate the enhanced damages that may be awarded to OWS under 35 U.S.C. § 284 in the event the Court or jury determines that Lumicore's infringement was willful. My analysis is grounded in the same data, methodologies, and assumptions that underlie the main body

4. All opinions expressed herein are based upon my education, training, and experience in the field of patent damages economics, the materials I have reviewed and relied upon (enumerated in Section IX below), and the analytical work I have performed. My opinions are held to a reasonable degree of economic certainty. I reserve the right to supplement or amend this Appendix as additional discovery is produced and as th

5. Based on my analysis, I hold the following opinions, each of which is discussed in greater detail in the sections that follow: (a) Post-Notice Period. Enhanced damages, if awarded, should apply to the post-notice period beginning January 15, 2023, which is the date that FairPoint Licensing Group, LLC ("FairPoint"), acting as OWS's licensing agent, sent the first formal licensing and notice letter to Lumicore's Gen

6. In the sections that follow, I set forth the factual and analytical basis for each of these opinions in detail. SECTION II: LEGAL FRAMEWORK FOR ENHANCED DAMAGES

II.A. Statutory Authority — 35 U.S.C. § 284

7. Section 284 of the Patent Act provides, in relevant part, that upon finding for the claimant in a patent infringement action, "the court may increase the damages up to three times the amount found or assessed." 35 U.S.C. § 284. The statute thus grants the trial court discretionary authority to enhance a damages award by up to a factor of three when the circumstances of the case warrant such an increase. Enhancemen

8. The purpose of enhanced damages is to address cases of egregious infringement behavior and to serve as a deterrent against willful and deliberate patent infringement. Enhanced damages are not intended to be awarded in every case, nor are they intended to be punitive per se, but they serve an important compensatory and deterrent function in the patent system. The availability of enhancement ensures that infringers

9. I understand that the determination of whether to award enhanced damages is a legal question for the Court, informed by the jury's factual finding on willfulness. My role as a damages expert is to provide the economic framework for calculating the enhanced damages amount under various multiplier scenarios, so that the Court and jury have a clear and reliable basis for assessing the appropriate level of enhancement

II.B. Supreme Court Standard — *Halo Electronics, Inc. v. Pulse Electronics, Inc.*, 579 U.S. 93 (2016)

10. In Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93 (2016), the Supreme Court addressed the standard for awarding enhanced damages under 35 U.S.C. § 284. The Court rejected the rigid two-part test that had been established by the Federal Circuit in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), which had required a showing of objective recklessness as a threshold matter. Th

11. Under Halo, enhanced damages are reserved for cases of "egregious infringement behavior"—that is, conduct involving "willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or, indeed, characteristic of a pirate." 579 U.S. at 103-04. The inquiry is subjective, focusing on the infringer's knowledge and intent, rather than requiring the objective recklessness threshold that had characteri

12. The Halo decision emphasized that § 284 calls for a totality-of-the-circumstances approach. The Court observed that the trial court should consider the "particular circumstances of the case" in deciding whether to exercise its discretion to enhance damages and, if so, by how much. The Court also noted that "[t]he sort of conduct warranting enhanced damages has been variously described in our cases as willful, wan

13. For purposes of my analysis, I have applied the economic framework for calculating enhanced damages under the assumption that the Court and jury may find Lumicore's infringement to be willful under the Halo standard, and I have constructed my damages scenarios to provide the Court with the range of available enhancement amounts depending on the multiplier selected.

II.C. The Read Factor Framework

14. Following Halo, courts in this district and others have continued to apply the nine-factor framework set forth in Read Corp. v. Portec, Inc., 970 F.2d 816, 826-27 (Fed. Cir. 1992), as a guide to the exercise of discretion in determining whether and to what extent to enhance damages under § 284. The nine Read factors are: (1) Whether the infringer deliberately copied the ideas or design of another; (2) Whether the

15. The Read factors are not exclusive, and no single factor is dispositive. Courts weigh the factors in the context of the totality of the circumstances, consistent with the Halo framework. The factors collectively address the infringer's state of mind, the egregiousness of its conduct, the harm caused, and the infringer's ability to bear the consequences of enhancement.

16. I note that the ultimate willfulness determination is a legal question for the Court and jury. My analysis in Section VI of this Appendix provides the economic framework for assessing the Read factors from a damages perspective, including the economic implications of each factor as it relates to the appropriate level of enhancement. I do not opine on the legal conclusion of willfulness itself; rather, I identify

III.A. Pre-Notice Period: Q3 2022 – January 14, 2023

17. The overall infringement period in this case begins in the third quarter of 2022 (Q3 2022), when Lumicore first launched the LumiLink 400G-ZR+ silicon-photonics transceiver module into the commercial market. This was the first of Lumicore's three accused product lines, and its introduction marked the beginning of the conduct that OWS alleges constitutes infringement of the '847 Patent, the '193 Patent, and the '5

18. OWS's internal engineering team, led by senior engineers within OWS's intellectual Property and Technology Assessment group, identified potential infringement of OWS's patents by the LumiLink 400G-ZR+ in approximately October 2022. This identification was based on a preliminary analysis of publicly available product specifications, marketing materials, and technical data sheets published by Lumicore in connection

19. Following the identification of potential infringement, OWS retained Benchmark Semiconductor Analysis, LLC ("Benchmark"), an independent semiconductor teardown and reverse-engineering firm, in November 2022 to perform a detailed physical teardown and analysis of the LumiLink 400G-ZR+ module. The teardown was conducted under the supervision of Kevin Ng, Lead Engineer at Benchmark, who has extensive experience in t

20. Benchmark delivered its initial teardown report on December 12, 2022. The report confirmed the use of accused waveguide multiplexer structures and thermal management micro-channels in the LumiLink 400G-ZR+ that, in the opinion of Benchmark's engineers, corresponded to the claimed structures of the '847 Patent, the '193 Patent, and the '562 Patent. The teardown report provided the factual foundation for the subseq

21. During the pre-notice period—that is, from Q3 2022 through January 14, 2023—Lumicore had not yet received formal written notice of OWS's patents or infringement allegations. While infringement damages are recoverable during this pre-notice period under the marking and notice provisions of 35 U.S.C. § 287, enhancement of damages is typically not sought for conduct occurring before the infringer received actual kno

III.B. Triggering Event: FairPoint First Licensing Letter — January 15, 2023

22. On January 15, 2023, FairPoint Licensing Group, LLC ("FairPoint"), acting as OWS's authorized licensing agent, sent the first formal licensing and notice letter (the "First Notice Letter") to Lumicore's General Counsel, Raymond Bautista. The First Notice Letter was prepared under the direction of Angela Reeves, Managing Director of FairPoint, and was sent via both certified mail and electronic mail to Lumicore's

23. The First Notice Letter specifically identified three of the four Asserted Patents—the '847 Patent (U.S. 10,234,847), the '193 Patent (U.S. 10,891,193), and the '562 Patent (U.S. 9,678,562)—and specifically accused the LumiLink 400G-ZR+ silicon-photonics transceiver module of infringing one or more claims of each identified patent. The letter included a summary of the relevant patent claims, a high-level descript

24. The First Notice Letter established actual written notice to Lumicore of OWS's patent rights and infringement allegations. This letter marks the beginning of the post-notice damages period for purposes of my enhanced damages analysis. From this date forward, Lumicore had actual knowledge of OWS's patents, the specific infringement allegations, and OWS's willingness to engage in licensing discussions. Any continue

III.C. Subsequent Notice Events

25. Following the First Notice Letter, a series of communications and events further reinforced Lumicore's knowledge of OWS's patent rights and infringement allegations. I summarize these events chronologically below, as each event is relevant to the Read factor analysis in Section VI and to the delineation of the post-notice damages period.

26. February 28, 2023: Lumicore's Initial Response. Lumicore responded to the First Notice Letter through its outside counsel, Hawthorne Vega & Cruz LLP ("HVC"), by letter dated February 28, 2023. The response was authored by Catherine "Kate" Rourke, a partner at HVC. In the response, Lumicore disputed that the LumiLink 400G-ZR+ infringed any of the identified patents and raised questions regarding the validity of th

27. April 20, 2023: In-Person Licensing Meeting, Austin, Texas. On April 20, 2023, representatives of FairPoint, OWS, and Lumicore met in person at a conference facility in Austin, Texas, for a licensing negotiation meeting. Attendees included Angela Reeves (FairPoint Managing Director), Rebecca Tanaka (OWS General Counsel), Raymond Bautista (Lumicore General Counsel), and Kate Rourke (HVC). The meeting lasted approx

28. May 15, 2023: FairPoint Second Licensing Letter. On May 15, 2023, FairPoint sent a second licensing and notice letter (the "Second Notice Letter") to Lumicore, again directed to Raymond Bautista. The Second Notice Letter expanded OWS's assertions in two important respects. First, it added the '015 Patent (U.S. 11,402,015, issued August 2, 2022) to the list of asserted patents. Second, it expanded the list of accu

29. July 10, 2023: Lumicore's Formal Declination. By letter dated July 10, 2023, Lumicore formally declined to take a license to OWS's patents. In the declination letter, Lumicore stated that it had obtained "competent legal opinions" concluding that its products do not infringe the Asserted Patents. Lumicore did not provide these opinion letters to OWS. As of the date of this Appendix, Lumicore has refused to produc

30. Q4 2023: Launch of LumiEdge 1600G-LR. In the fourth quarter of 2023, Lumicore launched its third accused product line, the LumiEdge 1600G-LR silicon-photonics transceiver module. This product launch occurred after Lumicore had received notice of all four Asserted Patents—including the '193 Patent and the '015 Patent, which OWS alleges the LumiEdge 1600G-LR infringes. Critically, Raymond Bautista admitted in his D

31. April 22, 2024: Complaint Filed. On April 22, 2024, OWS filed its Complaint in this action, initiating Case No. 2:24-cv-00319-JRG. The Complaint asserts infringement of all four Asserted Patents and seeks damages, including enhanced damages for willful infringement, and injunctive relief.

III.D. Post-Notice Period Defined

32. For purposes of my enhanced damages analysis, the post-notice period is defined as the period from January 15, 2023 (the date of the First Notice Letter) through the projected trial date of February 2, 2026. Consistent with the overall damages model set forth in my main report and Appendix A, I have calculated damages through the end of Q4 2025 (approximately December 31, 2025), which represents the latest period

33. The post-notice period spans approximately 36 months (January 15, 2023 through approximately December 31, 2025). During this period, all three accused product lines were actively sold in the market, and Lumicore's accused-product revenue grew substantially. As I demonstrate in Section IV below, the overwhelming majority of Lumicore's total infringement-period revenue falls within the post-notice period, reflectin

IV.A. Accused Products and Revenue Sources

34. Lumicore's three accused product lines are the core of the revenue base upon which the enhanced damages calculation is built. Each product line, its launch date, and its accused patents are summarized in the table below:

35. The revenue data underlying my analysis is drawn from three principal sources. First, I have reviewed Lumicore's public segment disclosures as reported in its 10-K annual filings with the Securities and Exchange Commission, which provide aggregate revenue figures for the relevant business segments but do not provide product-level breakdowns. Second, I have reviewed and relied upon product-level financial data pro

36. I have cross-referenced the product-level financial data produced in discovery against Lumicore's public 10-K segment disclosures to verify the consistency and reliability of the data. My analysis confirms that the product-level data reconciles to the public disclosures within expected rounding tolerances, and I am satisfied that the financial data relied upon in this Appendix is reliable and suitable for use in

IV.B. FY 2023 Accused-Product Revenue (Full Year)

37. For the fiscal year ended December 31, 2023, Lumicore's accused-product revenue, as reflected in the product-level financial data produced in discovery, was as follows:

38. The FY 2023 revenue figures above represent the full calendar year 2023. It is notable that the LumiLink 800G-DR8 generated $128.4 million in its first full year of availability, reflecting strong customer demand and rapid adoption in the hyperscale data-center market. The LumiEdge 1600G-LR generated $41.7 million despite launching in Q4 2023, indicating a rapid initial ramp. These figures are significant because

39. For context, Lumicore's total company-wide revenue for FY 2023 was approximately $312.6 million, as reported in its 10-K filing. The three accused product lines thus represented approximately 84.7% of Lumicore's total revenue for the year, underscoring the centrality of the accused products to Lumicore's business.

IV.C. Total Infringement-Period Revenue (Q3 2022 – Q1 2024)

40. For the period from Q3 2022 (the initial launch of the LumiLink 400G-ZR+) through Q1 2024 (the last full quarter before the Complaint was filed on April 22, 2024), total accused-product revenue across all three product lines was approximately $378.2 million, based on my preliminary analysis of the quarterly financial data produced in discovery. This figure encompasses both the pre-notice period (Q3 2022 through J

IV.D. Projected Total Revenue Through Trial (Q3 2022 – Q4 2025)

41. Projecting accused-product revenue through the end of Q4 2025—the end of the damages period used in my model—I estimate that total accused-product revenue across the entire infringement period (Q3 2022 through Q4 2025) will be approximately $714.6 million. This projection is based on the same methodology and assumptions described in detail in Appendix A, including growth rate analysis, product lifecycle modeling,

42. The post-notice portion of this total is derived by subtracting pre-notice revenue (Q3 2022 through January 14, 2023) from the total. The pre-notice revenue consists of partial-quarter revenue from the LumiLink 400G-ZR+ only, as this was the sole accused product available during the pre-notice period. The LumiLink 800G-DR8 and LumiEdge 1600G-LR were not launched until Q1 2023 and Q4 2023, respectively, both of wh

IV.E. Revenue Apportionment to Post-Notice Period

43. The detailed quarter-by-quarter revenue tables, including the precise apportionment between pre-notice and post-notice periods, are set forth in Exhibit D-1 to this Appendix. The post-notice revenue base used in my enhanced damages calculation is the same revenue base from which post-notice lost profits are derived in Appendix A. I have verified the internal consistency of the revenue figures used across all appe

44. To summarize the revenue apportionment: the pre-notice period encompasses approximately five months of revenue from a single product line (the LumiLink 400G-ZR+, from its Q3 2022 launch through January 14, 2023), while the post-notice period encompasses approximately thirty-six months of revenue from all three accused product lines. The post-notice period thus accounts for the vast majority of the total infringem

45. Post-notice lost profits are calculated using the same Panduit framework that I applied in the main body of my Expert Report and in Appendix A, but limited to the post-notice period (January 15, 2023 onward). The Panduit test, as established in Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978), and widely adopted by the Federal Circuit, requires a patent holder to demonstrate four fa