Contract analysis

I. PURPOSE AND SCOPE OF MEMORANDUM This internal memorandum outlines the anticipated scope and structure of Dr. Lawrence Keating's rebuttal expert report, to be prepared in response to Dr. Natasha Volkov's rebuttal damages report. Dr. Volkov, a Managing Director at Pinnacle Analytics Partners LLP (Houston, Texas), serves as Lumicore Technologies, Inc.'s retained damages expert in this matter. Her rebuttal report is e

1. Lost Profits under the *Panduit* Framework. Dr. Keating opined that OWS is entitled to lost profits of approximately $128.9 million, based on an analysis under Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978), demonstrating that OWS satisfies all four Panduit factors for the full infringement period (Q3 2022 through the projected trial date in Q1 2026).

2. Reasonable Royalty under *Georgia-Pacific*. In the alternative, Dr. Keating opined that a reasonable royalty rate of 8.5%, applied to total accused-product revenue of $714.6 million, yields a reasonable royalty of approximately $37.5 million (adjusted downward from the lost-profits figure to account for the different legal standard). This analysis was conducted under the framework established in Georgia-Pacific Co

3. Enhanced Damages for Willful Infringement. Dr. Keating provided the economic foundation for an enhanced-damages calculation under 35 U.S.C. § 284, based on Lumicore's willful and deliberate infringement of OWS's patents during the post-notice period (beginning January 15, 2023, the date of the first licensing letter from OWS's prior counsel, FairPoint intellectual Property Group PLLC). The total damages demand as

II. ANTICIPATED STRUCTURE OF DR. VOLKOV'S REBUTTAL REPORT A. Overview of Anticipated Volkov Opinions Based on Lumicore's litigation positions, interrogatory responses, and deposition testimony from CFO Janet Moreno and CTO Dr. Sandra Michaud, we anticipate that Dr. Volkov's core opinions will be as follows:

1. OWS is not entitled to lost profits because it cannot satisfy all four *Panduit* factors. Specifically, we expect Dr. Volkov to argue that OWS fails on Factor 2 (absence of acceptable non-infringing substitutes) and possibly Factor 3 (manufacturing and marketing capability to exploit the demand). This is consistent with the defense positions articulated in Lumicore's interrogatory responses and Ms. Moreno's deposi

2. The reasonable royalty rate should be significantly lower than 8.5%, likely in the range of 1.5%–3.0%. We anticipate that Dr. Volkov will rely on what she characterizes as "comparable" license agreements from adjacent but distinct technology fields (e.g., general semiconductor, RF/wireless, digital IC) to support a much lower royalty rate. She may also argue that Dr. Keating's comparable licenses are distinguishab

3. The royalty base should be apportioned to a component level (below the module level), not applied to the entire accused transceiver module price. This is likely to be one of Dr. Volkov's strongest arguments. She will contend that the entire market value rule ("EMVR") does not apply and that the smallest salable patent-practicing unit ("SSPPU") is something smaller than the transceiver module — likely the photonic

4. Enhanced damages for willful infringement are unwarranted and, in any event, should not be applied to the full post-notice period. Dr. Volkov will likely argue that Lumicore acted in good faith based on "competent legal opinions" (the existence of which has been asserted but not documented in discovery — see pending Motion to Compel, D.E. 38) and that any enhancement would be inappropriate as a matter of law and e

5. Total damages. Based on the foregoing opinions, we anticipate that Dr. Volkov's total damages figure will be in the range of $18 million to $35 million. This range is derived by applying her anticipated lower royalty rate (1.5%–3.0%) to a disaggregated royalty base (the PIC-level component value rather than the full module price) over the infringement period, and rejecting any enhancement for willful infringement.

III. REBUTTAL SECTION 1: DEFENDING THE LOST PROFITS ANALYSIS (PANDUIT FACTORS) This section addresses Dr. Keating's anticipated rebuttal to Dr. Volkov's challenge to the lost-profits analysis. Dr. Keating's opening report demonstrated that OWS satisfies all four Panduit factors and is therefore entitled to lost profits of approximately $128.9 million. We anticipate that Dr. Volkov will challenge each factor; the rebu

IV. REBUTTAL SECTION 2: DEFENDING THE REASONABLE ROYALTY ANALYSIS Dr. Keating's opening report presented an alternative reasonable royalty analysis under the Georgia-Pacific framework, opining that the appropriate reasonable royalty rate is 8.5% of accused-product revenue. Applied to total accused-product revenue of $714.6 million over the infringement period, this yields a reasonable royalty of approximately $37.5 m

1. OWS–Terralink Semiconductor License (2020). A running royalty of 6.5% on approximately $45 million in licensed revenue, covering a portfolio of OWS patents including the '847 Patent (waveguide multiplexer) and the '562 Patent (thermal management). This license was negotiated at arm's length between OWS and Terralink, a smaller competitor in the silicon-photonics market, and represents a floor for the royalty rate

2. OWS–NovaWave Corp. License (2021). A running royalty of 9.0% on approximately $22 million in licensed revenue, covering the same patent portfolio. This license was negotiated after NovaWave launched a transceiver product that OWS believed infringed the asserted patents. The 9.0% rate reflects the premium associated with licensing after product launch, which is analogous to the hypothetical negotiation in this case

3. OWS–Helix Integrated Photonics License (2022). A running royalty of 7.75% plus a $2.5 million upfront payment on approximately $68 million in licensed revenue. This license, the most recent in OWS's licensing program, represents the best evidence of the royalty rate that OWS has been able to command for licenses to the asserted patents. The combined effective rate (running royalty plus amortized upfront payment) i

4. Industry Comparable: *Stratos Photonics v. ArcLight Systems* Settlement (2019). A royalty rate of 8.0%, negotiated in settlement of a silicon-photonics patent infringement case involving transceiver technology. While this license involved different patents, the technology field, market conditions, and economic dynamics are closely comparable.

5. Industry Comparable: *Coreline Technologies v. Prisma Semiconductor* Cross-License (2021). An effective royalty rate of 10.2%, reflecting the net payment terms of a cross-license agreement between two silicon-photonics competitors. This agreement is relevant because it demonstrates that royalty rates in the 8%–12% range are standard in this industry for comparable patent portfolios. The range of comparable transac

V. REBUTTAL SECTION 3: APPORTIONMENT / ROYALTY BASE A. Anticipated Volkov Challenge: Entire Market Value Rule (EMVR) The apportionment argument is expected to be one of Dr. Volkov's strongest and most heavily litigated points. We anticipate that she will contend that the entire accused transceiver module price cannot serve as the royalty base because the patented features constitute only a component of the module's o