Contract analysis

From: Catherine Bloom <cbloom@calderwoodharkness.com> To: Christine Paulsen <cpaulsen@ridgemontcapital.com> Cc: Theodore Ted Hargrove <thargrove@ridgemontcapital.com> Date: Mon, 20 Jan 2025 10:47:00 -0000 Subject: Optiwave Semiconductor — Urgent: Patent Prosecution Dormancy Risks to Portfolio Value and Lender Compliance

I am Catherine Bloom, the responsible partner at Calderwood & Harkness LLP for the Optiwave Semiconductor Corp. patent prosecution engagement (C&H Matter No. 1014-00005). I am writing at the direction of Marcus Whitfield, OWS's General Counsel, to ensure that Veltrano Capital Partners has full visibility into the critical risks that have arisen from the continued dormancy of OWS's patent prosecution docket.

As you are aware, the Project Lighthouse budget freeze imposed on August 11, 2023 capped OWS's discretionary IP spending at $25,000 per quarter across all outside counsel. For context, OWS was spending approximately $87,400 per quarter with C&H alone on patent prosecution prior to the freeze. Our last substantive billable activity on the docket was September 6, 2023 — now more than sixteen months ago. In the interven

OWS currently holds 31 issued U.S. utility patents and has 12 pending U.S. patent applications, plus 4 PCT international applications, covering its next-generation silicon-photonics modulator architecture — technology that is core to OWS's 800G/1.6T data-center optical transceiver product line. The 12 pending applications are organized across three sub-families:

- **Sub-Family A — Core Modulator Architecture:** 5 applications - **Sub-Family B — Electrode Fabrication Process:** 4 applications - **Sub-Family C — Packaging & Thermal Management:** 3 applications

You will recall that Veltrano commissioned a portfolio valuation from Graystone Valuation Advisors in Q1 2023 in connection with a potential refinancing. Graystone's report, dated April 28, 2023, estimated the total patent portfolio's fair market value at $38.5 million. Of that figure, approximately $12.2 million — roughly 31.7% of total portfolio value — was attributed to the pending application families that are no

The significance of these pending applications extends well beyond their standalone value. As detailed in the freedom-to-operate analysis C&H delivered on October 14, 2022, OWS faces moderate-to-high infringement risk from blocking patents held by Pinnacle Optics, Inc. (U.S. Patent Nos. 10,823,417 and 11,105,662). The pending applications embody OWS's design-around strategy — they claim the specific architectural mod

The following five deadlines require immediate attention, listed in priority order:

1. **March 9, 2025 — U.S. App. No. 17/672,204 (Application A1, foundational modulator architecture).** This is the absolute deadline to respond to the outstanding non-final Office Action. All available extensions of time have been consumed; the two-month extension filed on September 6, 2023 was the last permissible extension under USPTO rules. No further extensions are available. Missing this deadline will result in

2. **April 21, 2025 — U.S. App. No. 17/814,057 (Application B1, electrode fabrication process).** This is the deadline to respond to the outstanding Restriction Requirement. A four-month emergency extension was filed on October 18, 2024 under emergency authorization from Sandra Koh, at a cost of $2,560, which preserved this application through the current deadline. Missing it will result in abandonment of the electro

3. **May 17, 2025 — EP 23 741 682.3 (Application B3, European regional phase).** This is the deadline to respond to the extended European search report received November 17, 2023. Failure to respond may result in deemed withdrawal of the European application under EPC rules. *Estimated cost: $15,000–$22,000 (including C&H fees, Breitenfeld & Vogt foreign associate fees, and EPO official fees).*

4. **July 9, 2025 — PCT/US2023/010584 and PCT/US2023/010612 (Applications A4 & A5).** This is the 30-month deadline for national-phase entry in any additional jurisdictions beyond Japan and Europe, which have already been entered. Missing this deadline permanently forecloses patent protection in all unselected jurisdictions, including South Korea and China.

5. **January 9, 2026 — JP 2024-542197 and JP 2024-542305 (Applications B4 & C3).** This is the three-year deadline to file examination requests at the Japan Patent Office.

The first two deadlines — March 9 and April 21, 2025 — are the most acute. Application A1, in particular, is the linchpin of OWS's entire design-around claim strategy. Its abandonment would be permanent and, in our assessment, would materially impair the company's competitive position and the value of the broader portfolio.

An additional dimension of risk warrants your attention. OWS maintains a $55 million senior secured revolving credit facility with Meridian National Bank, N.A. (originally dated September 30, 2020; amended and restated March 15, 2022), of which $32.5 million was drawn as of December 31, 2024. Section 5.15 of the Credit Facility requires OWS to "maintain, preserve, and protect all Material intellectual Property, inclu

We have separately analyzed the covenant compliance implications and are finalizing a memorandum for OWS management on this issue. Our preliminary conclusion is that there is meaningful risk that allowing pending applications to go abandoned could be construed as a default under Section 5.15 of the Credit Facility, which could in turn trigger cross-default provisions and potential acceleration of the $32.5 million ou

**Budget Reactivation — Three Scenarios**

To provide a clear framework for decision-making, C&H prepared a detailed budget reactivation proposal, which was provided separately to Marcus Whitfield and Sandra Koh on January 15, 2025. That proposal outlines three scenarios:

1. **Full Reactivation** of all 12 pending applications through mid-2026: estimated total cost of $220,000–$295,000, comprising $185,000–$245,000 in attorney fees and $35,000–$50,000 in government fees and foreign associate fees.

2. **Selective Prosecution** of the highest-value applications (A1, A3, B1, and B3): materially lower cost, with details set forth in the proposal memorandum.

3. **Minimum Deadline Preservation** — addressing only the imminent A1 and B1 responses to prevent abandonment and preserve time for further strategic decisions: estimated cost of approximately $26,500–$36,750 for A1 and B1 combined, which could be phased over Q1 2025.

I would note that even Scenario 3, the most conservative option, exceeds the current $25,000 per quarter cap under Project Lighthouse. This is the fundamental reason this communication is necessary.

I will mention briefly that C&H has $56,958.50 outstanding on this matter, consisting of $34,218.50 in unbilled work-in-progress and $22,740.00 in unpaid invoices from July and August 2023. We remain fully committed to this engagement and have continued to monitor deadlines and provide warnings to OWS management throughout the dormancy period at no charge. We would appreciate resolution of the outstanding balance in

I would respectfully request a meeting with you, Ted, and OWS management — Marcus, Sandra, and potentially Daniel Everhart as CFO — at the earliest opportunity, ideally within the next two weeks. The March 9, 2025 deadline for Application A1 leaves approximately seven weeks from the date of this email, and substantive work on the Office Action response needs to begin promptly. The response was partially drafted befor

I would be pleased to present the triage analysis and reactivation scenarios in detail, either in person at your offices or by videoconference, whichever is more convenient. Copies of the Docket Status & Deadline Triage Memorandum (dated January 15, 2025) and the Budget Reactivation Proposal Memorandum (dated January 15, 2025) can be provided directly to the Veltrano team upon client authorization from Marcus.

I want to emphasize that this communication is intended to be forward-looking and solution-oriented. There is significant value in this portfolio, and we believe it can be protected through a measured and well-prioritized approach. We are eager to work with you and the OWS team to find the right path forward.

Thank you for your time and attention, Christine. Please do not hesitate to reach out directly if you have any questions in advance of a meeting.

Catherine Bloom Partner, intellectual Property Group Calderwood & Harkness LLP 555 California Street, 42nd Floor San Francisco, CA 94104 T: (415) 772-3840 E: cbloom@calderwoodharkness.com USPTO Reg. No. 58,412