PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP One Embarcadero Center, 34th Floor San Francisco, California 94111
INTERNAL MEMORANDUM — PRIVILEGED & CONFIDENTIAL
April 18, 2023
TO: Firm Records / Matter File
FROM: Alan Ngo, Responsible Partner, intellectual Property Group Marcus Delgado, Billing Partner, intellectual Property Group
RE: Matter Closing Memorandum — 1014-00003
MATTER NAME: Optiwave Semiconductor Corp. v. Lumos Photonics, Inc.
CASE NUMBER: 5:22-cv-03417-EJD (U.S. District Court for the Northern District of California, San Jose Division)
C&H MATTER NUMBER: 1014-00003
CLASSIFICATION: Attorney Work Product / Attorney-Client Privileged — For Internal Use Only
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1. Purpose of Memorandum
This memorandum documents the formal closure of Calderwood & Harkness LLP ("C&H" or the "Firm") Matter No. 1014-00003, Optiwave Semiconductor Corp. v. Lumos Photonics, Inc., Case No. 5:22-cv-03417-EJD, pending in the United States District Court for the Northern District of California, San Jose Division, before the Honorable Edward J. Torvelis. The memorandum provides a comprehensive summary of the engagement, the procedural and substantive history of the litigation, the final disposition of all claims and counterclaims, the complete financial reconciliation of all fees, costs, disbursements, and retainer balances, and detailed instructions governing file retention, protective order compliance, and eventual file destruction.
The matter is being formally closed as of April 18, 2023, the date on which the Court entered its Order of Dismissal with Prejudice pursuant to the parties' Joint Stipulation of Dismissal. All claims asserted by the plaintiff, Optiwave Semiconductor Corp. ("OWS"), and all counterclaims asserted by the defendant, Lumos Photonics, Inc. ("Lumos"), have been dismissed with prejudice. The settlement was effectuated on a walk-away basis with mutual releases and no monetary payment in either direction.
This memorandum is intended solely for internal Firm use in connection with the administration and closure of the matter file. It is not to be distributed to the client or to any third party. The memorandum is protected by the attorney work product doctrine and the attorney-client privilege to the extent applicable.
2. Client and Matter Identification
2.1 Client Information
Client Name: Optiwave Semiconductor Corp. ("OWS")
Entity Type: Corporation organized and existing under the laws of the State of Delaware.
Principal Place of Business: 2775 Augustine Drive, Suite 400, San Jose, California 95054.
Employer Identification Number (EIN): 47-3918264.
Industry Description: OWS is a fabless semiconductor design company specializing in silicon photonics integrated circuits for data center interconnects and telecommunications applications. The company designs and sells silicon photonic transceivers, optical engines, and related semiconductor components used to facilitate high-bandwidth optical data transmission in hyperscale data centers, enterprise networking environments, and long-haul telecommunications infrastructure. OWS outsources the fabrication of its semiconductor devices to third-party foundries while retaining in-house responsibility for design, testing, packaging specifications, and customer integration support.
Fiscal Year 2022 Revenue: Approximately $187.4 million.
General Counsel and Primary Client Contact: Sandra Ellison, General Counsel, Optiwave Semiconductor Corp. Ms. Ellison served as the primary point of contact for all litigation-related matters throughout the engagement and was the authorized signatory on the engagement letter and the Settlement Agreement.
Vice President of intellectual Property: Theodore "Ted" Marchetti, Vice President of intellectual Property, Optiwave Semiconductor Corp. Mr. Marchetti provided substantial technical and strategic support throughout the litigation, including coordination with named inventors for deposition preparation and claim construction proceedings.
Majority Shareholder: Vantage Point Capital Partners Fund IV, LP ("Vantage Point"), holding approximately 62% of OWS's outstanding equity. Vantage Point is a growth equity fund focused on semiconductor and electronic systems investments. Vantage Point's Managing Partner is Douglas Fairbanks III, and its Operating Partner for the Semiconductor Sector is Rebecca Torres. Vantage Point is headquartered at 2600 Sand Hill Road, Suite 200, Menlo Park, California 94025. Vantage Point's concurrence was obtained for both the authorization of the litigation and the subsequent authorization of the walk-away settlement.
Primary Lender: First Pacific Commerce Bank, N.A. ("FPCB"), located at 345 Montgomery Street, San Francisco, California 94104. OWS maintains a $40 million revolving credit facility with FPCB, which facility includes a security interest in OWS's intellectual property assets, including the patents-in-suit. FPCB was notified of the commencement of the litigation in June 2022 and has been notified of the resolution and dismissal of the litigation in April 2023, as further described in Section 10 below.
2.2 Adverse Party Information
Defendant: Lumos Photonics, Inc. ("Lumos" or "LPI").
Entity Type: Corporation organized and existing under the laws of the State of Delaware.
Principal Place of Business: 9400 McNeil Drive, Building 7, Austin, Texas 78758.
Employer Identification Number (EIN): 81-2743056.
Nasdaq Ticker Symbol: LMPH.
Fiscal Year 2022 Revenue: Approximately $312.8 million. Lumos is a publicly traded fabless semiconductor company and a direct competitor to OWS in the silicon photonics market, with a particular focus on co-packaged optics solutions for next-generation data center switches and 400ZR/400ZR+ coherent pluggable transceivers for data center interconnect ("DCI") applications.
Chief Executive Officer: James "Jim" Harrelson.
General Counsel: Richard Talbot. Mr. Talbot was the authorized signatory on the Settlement Agreement and Mutual Release on behalf of Lumos.
Defendant's Outside Counsel: Brannick Howell & Stein LLP ("BHS"), 555 California Street, Suite 2800, San Francisco, California 94104. BHS served as lead outside counsel for Lumos throughout the entirety of the litigation. The lead partner at BHS responsible for the matter was Victoria "Tori" Ashworth. Ms. Ashworth signed the Joint Stipulation of Dismissal on behalf of Lumos.
2.3 Matter Details
C&H Matter Number: 1014-00003.
Case Caption: Optiwave Semiconductor Corp. v. Lumos Photonics, Inc.
Case Number: 5:22-cv-03417-EJD.
Court: United States District Court for the Northern District of California, San Jose Division.
Assigned Judge: The Honorable Edward J. Torvelis.
Nature of Action: Patent infringement action under 35 U.S.C. § 271 alleging direct and indirect infringement of four United States patents.
Date Matter Opened: June 3, 2022, the date on which the Complaint was filed with the Court.
Date Matter Closed: April 18, 2023, the date on which the Court entered the Order of Dismissal with Prejudice.
Duration of Matter: Approximately ten months and fifteen days from filing to dismissal.
3. Engagement Team
The following attorneys at Calderwood & Harkness LLP comprised the core engagement team for this matter:
Responsible Partner — Alan Ngo. Mr. Ngo is a partner in the Firm's intellectual Property Group, resident in the San Francisco office. Mr. Ngo is a registered patent attorney with the United States Patent and Trademark Office (USPTO Registration No. 52,871). He holds a Bachelor of Science degree in Electrical Engineering from the University of California, Los Angeles (UCLA) and a Juris Doctor from the University of California College of the Law, San Francisco (formerly UC Hastings). Mr. Ngo has twenty-two years of experience in patent litigation, with a particular focus on semiconductor, photonics, and electronic systems technologies. He served as lead trial counsel and the primary relationship partner for OWS throughout the engagement. Mr. Ngo directed all aspects of litigation strategy, claim construction proceedings, and settlement negotiations.
Billing Partner — Marcus Delgado. Mr. Delgado is a partner in the Firm's intellectual Property Group, resident in the San Francisco office. Mr. Delgado served as the billing partner for the matter and was responsible for overseeing the financial administration of the engagement, including invoice preparation, retainer management, and budget reporting to the client. Mr. Delgado also contributed substantively to the litigation, particularly with respect to discovery management and the development of the damages theory.
Lead Associate — Omar Siddiqui. Mr. Siddiqui is a senior associate in the Firm's intellectual Property Group, resident in the San Francisco office. Mr. Siddiqui has six years of experience in intellectual property litigation and holds a Master of Science degree in Electrical Engineering from the Georgia Institute of Technology, in addition to his Juris Doctor from Stanford Law School. Mr. Siddiqui served as the lead associate on the matter and was principally responsible for the preparation of claim construction briefs, coordination of technical discovery, management of inventor depositions, and liaison with expert witnesses.
Working Associate — Christy Bauer. Ms. Bauer is an associate in the Firm's intellectual Property Group, resident in the San Francisco office. Ms. Bauer has three years of experience in intellectual property litigation and holds a Bachelor of Science degree in Physics from the California Institute of Technology (Caltech), in addition to her Juris Doctor from the University of Virginia School of Law. Ms. Bauer provided substantial support across all phases of the litigation, including drafting discovery responses, assisting with claim construction research and briefing, conducting prior art analysis, and coordinating document review and production.
Engagement Letter: The engagement letter was executed on May 12, 2022. It was signed by Alan Ngo and Marcus Delgado on behalf of Calderwood & Harkness LLP and by Sandra Ellison, General Counsel, on behalf of Optiwave Semiconductor Corp. The engagement letter set forth the scope of the representation, the fee arrangement (as described in Section 8 below), the retainer terms, the conflict waiver provisions, and the Firm's standard terms of engagement for litigation matters.
4. Patents-in-Suit
OWS asserted four United States patents against Lumos in this action. Each patent relates to various aspects of silicon photonics integrated circuit design, fabrication, and integration. The patents-in-suit and the specific claims asserted are described below.
4.1 U.S. Patent No. 10,234,567 ("the '567 Patent")
Title: "Integrated Waveguide Coupler with Tapered Mode Converter for Silicon Photonics Platforms"
Application Filing Date: March 14, 2017.
Issue Date: March 19, 2019.
Named Inventors: Dr. Kevin Fong, Dr. Priya Ramanathan, and Hideo Tanaka.
Asserted Claims: Claims 1, 4, 7, 12, and 15.
The '567 Patent is directed to an integrated optical waveguide coupler structure that employs a tapered mode converter to efficiently couple light between waveguides of different cross-sectional dimensions on a silicon photonics platform. The patent describes a design in which the taper is configured to adiabatically transition the optical mode from a first waveguide to a second waveguide while minimizing insertion loss and back-reflection. The asserted claims cover the structural and functional characteristics of the tapered coupler, including the geometry of the taper, the mode conversion mechanism, and the integration of the coupler within a broader silicon photonics platform.
4.2 U.S. Patent No. 10,891,234 ("the '234 Patent")
Title: "Germanium-on-Silicon Photodetector with Graded Buffer Layer for Enhanced Responsivity"
Application Filing Date: September 8, 2017.
Issue Date: January 14, 2021.
Named Inventors: Dr. Kevin Fong and Dr. Amara Osei.
Asserted Claims: Claims 1, 3, 5, 8, and 11.
The '234 Patent is directed to a germanium-on-silicon photodetector structure that includes a graded buffer layer between the silicon substrate and the germanium absorber layer. The graded buffer layer is described as having a continuously varying germanium concentration that transitions gradually from the silicon lattice constant to the germanium lattice constant, thereby reducing threading dislocation density and enhancing photodetector responsivity at wavelengths used in optical communications (e.g., 1310 nm and 1550 nm). The asserted claims address the composition and structure of the graded buffer layer, the relationship between the buffer layer and the absorber layer, and the resulting photodetector performance characteristics.
4.3 U.S. Patent No. 11,045,678 ("the '678 Patent")
Title: "Multi-Channel Optical Transceiver with Integrated Wavelength-Division Multiplexing on Silicon"
Application Filing Date: June 22, 2018.
Issue Date: June 29, 2021.
Named Inventors: Dr. Priya Ramanathan, Dr. Amara Osei, and Liwei Zhang.
Asserted Claims: Claims 1, 2, 6, 9, and 14.
The '678 Patent is directed to a multi-channel optical transceiver that integrates wavelength-division multiplexing (WDM) components monolithically on a silicon substrate. The transceiver is described as incorporating arrayed laser sources, silicon-based modulators, wavelength multiplexers and demultiplexers, and germanium photodetectors, all fabricated within a single monolithic semiconductor processing sequence. The asserted claims cover the architecture of the multi-channel transceiver, the monolithic integration of the WDM components, and the methods by which the various optical and electronic functional blocks are co-fabricated on a single silicon die.
4.4 U.S. Patent No. 11,312,890 ("the '890 Patent")
Title: "Driver Circuit Architecture for High-Speed Silicon Photonic Mach-Zehnder Modulators"
Application Filing Date: November 15, 2018.
Issue Date: April 26, 2022.
Named Inventors: Dr. Kevin Fong and Rajesh Iyer.
Asserted Claims: Claims 1, 5, 8, and 13.
The '890 Patent is directed to a driver circuit architecture specifically designed and optimized for high-speed silicon photonic Mach-Zehnder modulators ("MZMs"). The patent describes a co-integrated driver circuit that shares semiconductor process layers and doping profiles with the MZM device itself, enabling reduced parasitic capacitance, improved signal integrity at data rates of 100 Gbaud and above, and simplified packaging. The asserted claims address the circuit topology of the driver, the co-integration of the driver with the MZM on a common substrate, and the resulting performance benefits for high-speed optical modulation.
5. Accused Products
OWS accused two Lumos product lines of infringing one or more claims of each of the four patents-in-suit. The accused products are described below.
LumosBridge™ 800G Optical Engine. The LumosBridge 800G is a co-packaged optics ("CPO") engine designed for integration with hyperscale data center network switches. The product integrates silicon photonic transmit and receive paths with electronic driver and transimpedance amplifier (TIA) circuitry in a multi-chip module package. The LumosBridge 800G was first shipped to customers in the first quarter of 2022 and carries a unit price in the range of approximately $1,200 to $1,800, depending on configuration, volume, and customer pricing agreements.
LumosEdge™ 400ZR+ Pluggable Transceiver. The LumosEdge 400ZR+ is a pluggable coherent optical transceiver in the QSFP-DD (Quad Small Form Factor Pluggable Double Density) form factor. It is designed for data center interconnect applications at distances up to 120 kilometers and implements the OpenZR+ multi-source agreement specifications. The LumosEdge 400ZR+ has been in volume production since the third quarter of 2021 and carries a unit price in the range of approximately $600 to $900, depending on volume and customer pricing.
Combined Accused Product Revenue. Based on publicly available financial disclosures and information obtained during the course of discovery, the combined revenue attributable to the LumosBridge 800G and LumosEdge 400ZR+ product lines for calendar year 2022 was approximately $148.6 million. The combined revenue for the pre-suit period of the first and second quarters of 2022 (Q1–Q2 2022) was approximately $62.3 million. These revenue figures formed the preliminary basis for the damages analysis being developed by OWS's damages expert, Dr. Lawrence Kessler.
6. Summary of Litigation History
6.1 Pre-Suit Phase (March–May 2022)
The events leading to the commencement of this litigation began in early 2022, when OWS's internal intellectual property team, led by Vice President of intellectual Property Ted Marchetti, identified potential infringement of several OWS patents by Lumos's LumosBridge 800G and LumosEdge 400ZR+ product lines. After an initial internal review, OWS retained Calderwood & Harkness to conduct a detailed pre-suit infringement analysis and advise on litigation strategy.
On March 15, 2022, OWS, through outside counsel at a predecessor engagement (prior to formal retention of C&H for the litigation itself), sent a cease-and-desist letter to Lumos Photonics identifying the '567 Patent and the '234 Patent as patents believed to be infringed by Lumos's accused products. The letter demanded that Lumos cease all infringing activities, enter into licensing discussions, and provide an accounting of sales of the accused products.
On April 4, 2022, Lumos responded to the cease-and-desist letter through its General Counsel, Richard Talbot. The response denied infringement of either the '567 Patent or the '234 Patent on both literal and doctrine-of-equivalents grounds. The response further asserted that both patents were invalid in view of prior art not considered during prosecution and that Lumos's products were designed independently without reference to OWS's patents or technology.
On April 28, 2022, the OWS Board of Directors convened a special meeting to consider the intellectual property dispute and authorized the initiation of litigation against Lumos. The authorization was made following presentations by Sandra Ellison, Ted Marchetti, and Alan Ngo (in his capacity as C&H's relationship partner). Vantage Point Capital Partners, as the majority shareholder, concurred with the Board's decision through its Operating Partner, Rebecca Torres, who attended the Board meeting by invitation.
On May 12, 2022, the engagement letter between Calderwood & Harkness LLP and Optiwave Semiconductor Corp. was executed, formally retaining C&H to represent OWS as lead outside counsel in the patent infringement litigation against Lumos.
During the pre-suit phase, C&H undertook the following substantive work:
(a) Infringement Analysis Memoranda. C&H prepared detailed claim-by-claim infringement analysis memoranda for each of the four patents ultimately asserted in the litigation (the '567, '234, '678, and '890 Patents). These analyses addressed both literal infringement and infringement under the doctrine of equivalents, and incorporated reverse-engineering data and publicly available technical specifications for the LumosBridge 800G and LumosEdge 400ZR+ products.
(b) Consolidated Validity Risk Assessment. C&H prepared a consolidated validity risk assessment evaluating the strength of each asserted patent against identified prior art references, prosecution history estoppel issues, and potential challenges under 35 U.S.C. §§ 102, 103, and 112.
(c) Litigation Strategy Memorandum to the Board. C&H prepared a comprehensive litigation strategy memorandum for presentation to the OWS Board of Directors, outlining the strengths and weaknesses of the infringement case, potential damages ranges, estimated litigation costs and timeline, forum selection considerations, and recommendations regarding the scope of the patent assertions.
(d) Litigation Funding Analysis. At the Board's request, C&H evaluated a term sheet from Resolute Litigation Finance, LP for third-party litigation funding. After analysis of the terms—which included a funding commitment of up to $3.5 million in exchange for a 3x return on invested capital from any recovery and a 15% interest in net proceeds above the 3x threshold—the Board and Vantage Point declined the Resolute term sheet, electing instead to fund the litigation from OWS's operating resources and revolving credit facility.
(e) Pre-Litigation Patent Portfolio Valuation. C&H coordinated a pre-litigation patent portfolio valuation performed by Clearpath IP Valuation Services, Inc. The Clearpath valuation, completed in May 2022, valued OWS's entire patent portfolio at approximately $215 million and the four asserted patents collectively at approximately $42.8 million, using a combination of income-based and market-based valuation methodologies.
6.2 Complaint and Early Proceedings (June–August 2022)
On June 3, 2022, C&H filed the Complaint on behalf of OWS in the United States District Court for the Northern District of California, San Jose Division. The Complaint asserted claims of patent infringement under 35 U.S.C. § 271 with respect to all four patents-in-suit and identified the LumosBridge 800G and LumosEdge 400ZR+ as the accused instrumentalities. The Complaint alleged both direct infringement (§ 271(a)) and induced infringement (§ 271(b)), and sought damages exceeding $75 million, calculated on the basis of a 7.5% reasonable royalty rate applied to the accused products' revenue, together with enhanced damages for willful infringement under 35 U.S.C. § 284 and attorneys' fees under 35 U.S.C. § 285. The Complaint also sought permanent injunctive relief under 35 U.S.C. § 283.
On June 6, 2022, in compliance with the reporting covenants of OWS's revolving credit facility, C&H assisted OWS in sending a formal notification letter to First Pacific Commerce Bank, N.A. advising FPCB of the commencement of material litigation involving intellectual property assets subject to FPCB's security interest.
On June 28, 2022, Lumos was formally served with the Summons and Complaint through Ashgrove Services Inc., its registered agent for service of process in the State of California. Service was effected in accordance with Federal Rule of Civil Procedure 4(h) and California Code of Civil Procedure § 416.10.
On July 29, 2022, Lumos, through its counsel Brannick Howell & Stein LLP, filed its Answer to the Complaint and Counterclaims. The Answer denied all allegations of infringement, raised numerous affirmative defenses (including non-infringement, invalidity, prosecution history estoppel, and laches), and asserted Counterclaims for declaratory judgment of non-infringement and invalidity under 35 U.S.C. §§ 102 (anticipation), 103 (obviousness), and 112 (indefiniteness and lack of written description).
On August 15, 2022, the Court held the Initial Case Management Conference pursuant to Federal Rule of Civil Procedure 16(b) and the Court's Standing Order. At the conference, the Court set the case schedule, including setting the Markman hearing (claim construction hearing pursuant to Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996)) for January 30, 2023. The Court also set deadlines for the exchange of claim construction contentions in accordance with the Patent Local Rules of the Northern District of California.
On August 22, 2022, the parties exchanged Initial Disclosures pursuant to Federal Rule of Civil Procedure 26(a)(1) and the Court's scheduling order. OWS's initial disclosures identified key witnesses, including the named inventors of the patents-in-suit, OWS's licensing personnel, and relevant technical and business personnel. Lumos's initial disclosures identified its engineering team members involved in the design and development of the accused products, relevant business personnel, and third-party foundry contacts.
6.3 Claim Construction Phase (September 2022–February 2023)
The claim construction phase proceeded in accordance with the Patent Local Rules of the Northern District of California ("Patent L.R.") and the Court's scheduling order.
On September 12, 2022, the parties exchanged Preliminary Claim Construction Contentions pursuant to Patent L.R. 4-1. Each party identified the claim terms it contended required construction and proposed constructions for those terms. OWS's preliminary contentions identified seven terms requiring construction; Lumos's preliminary contentions identified nine terms requiring construction.
On October 3, 2022, the parties exchanged Responsive Claim Construction Contentions pursuant to Patent L.R. 4-2, including responsive proposed constructions and identification of intrinsic and extrinsic evidence supporting each party's positions.
On October 14, 2022, the parties filed the Joint Claim Construction and Prehearing Statement pursuant to Patent L.R. 4-3. The Joint Statement identified a total of eleven (11) disputed claim terms across the four patents-in-suit. The parties agreed on the construction of several additional terms that had initially been in dispute. The Joint Statement also identified the intrinsic and extrinsic evidence on which each party intended to rely.
On October 31, 2022, claim-construction-related discovery closed. During this phase, C&H took the depositions of three of the named inventors of the patents-in-suit: Dr. Kevin Fong (named inventor on the '567, '234, and '890 Patents), Hideo Tanaka (named inventor on the '567 Patent), and Dr. Amara Osei (named inventor on the '234 and '678 Patents). These depositions addressed the inventors' understanding of the disputed claim terms, the prosecution history of the patents, and the state of the art at the time of the inventions.
On December 5, 2022, OWS filed its Opening Claim Construction Brief (45 pages). The brief argued for broad constructions of the disputed claim terms that would encompass Lumos's accused product architectures. The brief relied extensively on the intrinsic evidence, including the patent specifications, prosecution histories, and the testimony of the named inventors.
On December 19, 2022, Lumos filed its Responsive Claim Construction Brief (45 pages). The brief argued for narrow constructions of the disputed terms, contending that the patent specifications, prosecution histories, and the applicants' statements during prosecution compelled constructions that excluded Lumos's product designs.
On January 9, 2023, OWS filed its Reply Claim Construction Brief (15 pages), addressing the arguments raised in Lumos's responsive brief and rebutting Lumos's characterizations of the prosecution history and specification disclosures.
On January 19, 2023, Lumos filed a Sur-Reply Claim Construction Brief (15 pages), by leave of the Court. The Court granted Lumos's motion for leave to file a sur-reply over OWS's objection, finding that OWS's reply brief had raised new arguments regarding the prosecution history of the '567 Patent to which Lumos should be permitted to respond.
On January 30, 2023, the Court held the Markman Hearing. The hearing lasted approximately six and one-half hours (6.5 hours) and included oral argument by counsel and testimony from technical tutorial witnesses presented by each side. OWS's technical tutorial witness was Dr. Harold Whitfield of Whitfield Technical Consulting Group, Inc., a silicon photonics expert who provided the Court with a tutorial on the underlying technology and testified regarding the proper construction of the disputed claim terms. Lumos's technical tutorial witness was Dr. Raymond Ng, Of Counsel at Brannick Howell & Stein LLP, who also holds a Ph.D. in electrical engineering and provided testimony regarding Lumos's proposed constructions.
6.4 Markman Order and Post-Markman Assessment (February 2023)
On February 17, 2023, the Court issued its Markman Order — a 34-page written opinion construing all eleven disputed claim terms. The Markman Order was substantially adverse to OWS's positions. The Court adopted the Defendant's proposed construction, or a construction substantially aligned with the Defendant's position, on eight of the eleven disputed terms. The Court adopted OWS's proposed construction on two of the eleven terms. The Court adopted a modified construction — differing from both parties' proposals — on one term.
The following key adverse constructions were particularly impactful to OWS's infringement theories:
(a) "Adiabatically coupled" ('567 Patent, Claims 1 and 12). The Court construed "adiabatically coupled" to mean "coupled through a gradual, continuous taper designed and configured to prevent excitation of higher-order modes over the entire transition length." This construction required that the taper be continuous — i.e., without segmentation, discrete steps, or discontinuities along the transition length. Lumos's LumosBridge 800G and LumosEdge 400ZR+ products employ a segmented (non-continuous) taper design in which the waveguide transition is implemented through a series of discrete segments rather than a smooth, continuous taper. Under the Court's construction, Lumos's segmented taper design falls outside the scope of the "adiabatically coupled" limitation, effectively eliminating OWS's infringement theory as to the '567 Patent. The Court's construction was driven in significant part by prosecution history estoppel arising from amendments made during prosecution to overcome the Tanaka prior art reference (U.S. Patent No. 9,456,012), in which the applicants narrowed the claims to distinguish over Tanaka's segmented coupler design.
(b) "Continuously varying germanium concentration" ('234 Patent, Claims 1 and 8). The Court construed "continuously varying germanium concentration" to mean "increases monotonically and without step changes from the silicon substrate interface to the absorber layer." This construction requires that the germanium concentration profile in the graded buffer layer increase in a smooth, monotonic fashion without any abrupt transitions or step changes. Lumos's accused products utilize a step-graded SiGe (silicon-germanium) buffer layer architecture consisting of four discrete compositional steps with germanium fractions of 0.25, 0.50, 0.75, and 1.0, respectively. Under the Court's construction, Lumos's step-graded buffer design is excluded from the scope of the "continuously varying" limitation, effectively eliminating OWS's infringement theory as to the '234 Patent.
(c) "Monolithically formed" ('678 Patent, Claims 1 and 9). The Court construed "monolithically formed" to mean "fabricated entirely within the same front-end-of-line and back-end-of-line semiconductor processing sequence on a single silicon substrate without heterogeneous bonding or attachment of separately fabricated optical components." This construction requires that all optical and electronic components of the transceiver be fabricated in a unified semiconductor processing sequence on a single silicon substrate, without any heterogeneous integration steps such as bonding, attachment, or transfer of separately fabricated components. Lumos's accused products incorporate micro-transfer-printed III-V (indium phosphide-based) gain elements that are fabricated on a separate III-V substrate and then micro-transfer-printed onto the silicon photonics die. Under the Court's construction, Lumos's use of micro-transfer-printed III-V gain elements falls outside the scope of the "monolithically formed" limitation, effectively eliminating OWS's infringement theory as to the '678 Patent. The Court's construction was influenced in part by an amendment made during prosecution of the '678 Patent in which the applicants added the "monolithically formed" limitation to distinguish over cited prior art describing hybrid integration approaches.
(d) "Co-integrated" ('890 Patent, Claims 1 and 5). The Court construed "co-integrated" to require that the driver circuit and the Mach-Zehnder modulator share "the same semiconductor process, shared doping profiles and process layers, without bond wires, interposers, or package-level routing." This construction requires a level of monolithic co-fabrication in which the driver and modulator are formed in the same process layers on the same substrate, sharing doping profiles and without any form of die-to-die or chip-to-chip interconnection. Lumos's accused products employ a separate CMOS driver die that is flip-chip bonded to the silicon photonics die via copper pillar micro-bumps, representing a heterogeneous multi-chip integration approach rather than monolithic co-integration. Under the Court's construction, Lumos's flip-chip bonded driver architecture is excluded from the scope of the "co-integrated" limitation, significantly weakening OWS's infringement theory as to the '890 Patent.
On February 21, 2023, C&H conducted an internal post-Markman assessment to evaluate the impact of the Court's claim constructions on OWS's infringement theories. The assessment concluded that OWS's infringement theories were untenable as to three of the four patents (the '567, '234, and '678 Patents) and significantly weakened as to the fourth (the '890 Patent). With respect to the '890 Patent, while the "co-integrated" construction was highly adverse, certain dependent claims (particularly Claims 8 and 13) contained additional limitations that were not directly impacted by the "co-integrated" construction. However, even as to these claims, the narrowing effect of the "co-integrated" construction on independent Claim 1 made it extremely difficult to maintain a viable infringement position.
On February 24, 2023, the OWS Board of Directors convened a special meeting at which C&H presented the Markman impact assessment. The presentation addressed the Court's constructions, their impact on each asserted patent, the likelihood of success at trial under the adopted constructions, the estimated remaining litigation costs through trial ($1.6 million to $2.1 million), and the risk of an adverse judgment on Lumos's invalidity counterclaims. Following the presentation and discussion, the Board authorized C&H to initiate settlement discussions with Lumos. Vantage Point concurred with the Board's decision.
6.5 Fact discovery (November 2022–March 2023)
Fact discovery proceeded in parallel with the claim construction phase, as is typical in patent cases in the Northern District of California.
On November 7, 2022, Lumos served its first set of document requests on OWS, comprising 98 individual requests for production directed to, among other things, OWS's patent prosecution files, licensing history, prior art searches, product development records, revenue and sales data, and communications with third parties regarding the patents-in-suit.
On November 21, 2022, OWS served its first set of document requests on Lumos, comprising 112 individual requests for production, along with 25 interrogatories. OWS's discovery was directed to Lumos's product design and development records, fabrication specifications, sales and revenue data for the accused products, communications regarding OWS's patents, prior art activities, and related topics.
In December 2022, both parties served their respective responses and objections to the outstanding discovery requests. Each party's responses included a combination of substantive responses, objections on grounds of relevance, overbreadth, proportionality, and privilege, and rolling production commitments.
In January 2023, C&H sent a meet-and-confer letter to BHS identifying specific discovery deficiencies in Lumos's responses and productions, including incomplete production of design-stage documentation for the accused products, failure to produce foundry communications and process design kit ("PDK") specifications, and insufficiently specific interrogatory answers regarding the development timeline for the accused products. The meet-and-confer process was ongoing at the time discovery was stayed.
On March 10, 2023, by stipulation of the parties and order of the Court, all discovery deadlines were stayed pending settlement discussions. The stay was entered without prejudice to either party's right to resume discovery in the event settlement efforts were unsuccessful.
In connection with fact discovery and anticipated expert discovery, the following expert retention agreements were executed:
(a) Dr. Harold Whitfield, Whitfield Technical Consulting Group, Inc. — retention agreement executed in August 2022 for claim construction support, infringement analysis, and presentation as a technical tutorial witness at the Markman hearing.
(b) Dr. Lawrence Kessler, Apex Claim Analytics LLC — retention agreement executed in October 2022 for the development of a reasonable royalty damages analysis under the Georgia-Pacific framework (Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970)).
6.6 Settlement and Dismissal (March–April 2023)
Following the Board's authorization of settlement discussions on February 24, 2023, settlement negotiations proceeded as follows:
On March 6, 2023, Alan Ngo placed a telephone call to Tori Ashworth of BHS to discuss the possibility of a negotiated resolution. The parties agreed to a 30-day settlement window during which they would engage in good-faith negotiations with the aim of resolving the dispute without the need for further litigation.
On March 10, 2023, the parties filed a Stipulated Stay of All discovery Deadlines, which the Court entered the same day. The stipulation provided that all remaining discovery deadlines, including the close of fact discovery, expert disclosures, and expert depositions, would be stayed pending the outcome of settlement discussions, with the stipulation to be revisited by the parties and the Court at the expiration of the 30-day settlement window.
On March 15, 2023, OWS made an initial settlement proposal to Lumos. OWS proposed a cross-license arrangement under which Lumos would pay a nominal one-time royalty of $500,000 in exchange for a non-exclusive license to OWS's asserted patents, with OWS receiving a reciprocal non-exclusive license to a defined subset of Lumos's patent portfolio relevant to silicon photonics transceiver technologies. Lumos rejected this proposal, stating that it was unwilling to pay any royalty given the outcome of the Markman hearing and that it did not believe OWS's patents were valid or infringed.
On March 22, 2023, Lumos made a counterproposal. Lumos proposed a "walk-away" settlement under which each party would execute mutual general releases of all claims arising from the litigation, each party would bear its own attorneys' fees and costs, no license would be granted, and all claims and counterclaims would be dismissed with prejudice. No payment would be made in either direction.
On March 28, 2023, the OWS Board of Directors convened telephonically to consider Lumos's walk-away proposal. After discussion with C&H regarding the litigation risks, the costs of continued litigation through trial, and the practical reality that the Markman constructions had substantially eliminated OWS's infringement theories, the Board approved the walk-away settlement terms. Vantage Point Capital Partners concurred with the Board's decision.
On April 5, 2023, the parties executed the Settlement Agreement and Mutual Release. The Settlement Agreement was signed by Sandra Ellison on behalf of Optiwave Semiconductor Corp. and by Richard Talbot on behalf of Lumos Photonics, Inc. The material terms of the Settlement Agreement are summarized in Section 7 below.
On April 10, 2023, the parties filed a Joint Stipulation of Dismissal with Prejudice with the Court, pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii). The Joint Stipulation was signed by Alan Ngo on behalf of C&H (for OWS) and by Tori Ashworth on behalf of BHS (for Lumos). The Joint Stipulation provided for the dismissal with prejudice of all claims asserted in OWS's Complaint and all counterclaims asserted in Lumos's Answer and Counterclaims, with each party to bear its own costs and attorneys' fees.
On April 18, 2023, the Court entered its Order of Dismissal with Prejudice, formally closing the case. The Order dismissed all claims and counterclaims with prejudice in accordance with the parties' Joint Stipulation.
7. Final Disposition
Disposition: Dismissed with prejudice by Joint Stipulation pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii), by Order of the Court entered April 18, 2023.
Settlement Terms: The material terms of the Settlement Agreement and Mutual Release, executed on April 5, 2023, are as follows:
(a) No Payment. No payment of any amount in either direction. Neither OWS nor Lumos is obligated to pay any sum to the other party in connection with the settlement.
(b) Mutual General Releases. Each party executed mutual general releases of all claims, counterclaims, demands, causes of action, and liabilities of any kind or nature arising from or related to the litigation, including all claims of patent infringement, non-infringement, invalidity, and unenforceability.
(c) No License Granted. No patent license of any kind is granted by either party to the other. Each party retains all rights in its respective intellectual property, and the settlement does not create, convey, or imply any license, covenant not to sue, or other intellectual property right.
(d) Each Party Bears Own Costs. Each party shall bear its own attorneys' fees, costs, expenses, and disbursements incurred in connection with the litigation.
(e) No Admissions. Neither party makes any admission of patent infringement, non-infringement, validity, invalidity, enforceability, or unenforceability. The settlement is not to be construed as evidence of or an admission regarding any of the foregoing.
(f) Dismissal with Prejudice. All claims asserted by OWS in the Complaint and all counterclaims asserted by Lumos in the Answer and Counterclaims are dismissed with prejudice.
8. Financial Summary
8.1 Fee Arrangement
The engagement was conducted pursuant to a blended hourly rate arrangement, subject to a 10% volume discount on each timekeeper's standard billing rate. In addition, OWS was required to maintain a $100,000 evergreen retainer, replenished on a quarterly basis. The retainer was applied against outstanding fees and costs, with any unused balance to be returned to the client upon matter closure.
The applicable standard rates and effective rates (after application of the 10% volume discount) for each timekeeper on the engagement team were as follows:
8.2 Total Fees and Costs
The following table summarizes the total fees, costs, and disbursements incurred in connection with the matter:
The Board-approved litigation budget through trial was $4.2 million. Actual total litigation spend of $2,549,568 represents approximately 60.7% of the approved budget. The favorable budget variance is attributable to the early resolution of the matter at the post-Markman stage, which eliminated costs that would have been incurred for the completion of fact discovery, expert discovery (including expert reports and depositions), summary judgment or Daubert motion practice, pretrial preparation and motions in limine, and trial.
8.3 Retainer Reconciliation
The following table sets forth the retainer deposits received, the net retainer applied to fees, and the retainer balance to be returned to the client:
8.4 Fee Collection Summary
All fees and costs have been billed and collected. There are no outstanding receivables associated with this matter. A trust account check in the amount of $62,488.00 is to be issued to Optiwave Semiconductor Corp. and delivered to Sandra Ellison, General Counsel, together with the final fee reconciliation letter. Marcus Delgado will coordinate the preparation and issuance of the trust account check and accompanying correspondence.
8.5 Budget Variance Analysis
Explanation of Variance: The matter was resolved at the post-Markman stage, approximately ten months after the Complaint was filed and approximately two months after the Court issued its Markman Order. The early resolution eliminated the need for, and associated costs of, the following litigation phases and activities that had been budgeted through trial: (i) completion of fact discovery, including resolution of pending discovery disputes, additional depositions, and document review and production; (ii) expert discovery, including preparation and service of opening and rebuttal expert reports, expert depositions, and related expert consulting fees; (iii) summary judgment and/or Daubert motion practice; (iv) pretrial preparation, including motions in limine, proposed jury instructions, verdict forms, trial briefs, and witness preparation; and (v) trial, which had been estimated at seven to ten days before a jury.
9. Expert Engagements — Status at Closing
9.1 Dr. Harold Whitfield — Whitfield Technical Consulting Group, Inc.
Location: Palo Alto, California.
Date of Retention: August 2022.
Scope of Engagement: Dr. Whitfield was retained to provide expert consulting services in connection with claim construction, infringement analysis, and the preparation and delivery of a technical tutorial presentation for the Markman hearing. Dr. Whitfield is a recognized expert in silicon photonics design and fabrication, with over thirty years of experience in integrated photonics research and development, including positions at Tidewater Holdings, Stanford University, and multiple silicon photonics startup companies.
Work Performed: Dr. Whitfield provided claim construction consulting support, including analysis of the disputed claim terms in the context of the patent specifications, prosecution histories, and relevant prior art. Dr. Whitfield also prepared and delivered a technical tutorial presentation at the Markman hearing on January 30, 2023, providing the Court with background on silicon photonics technology, waveguide coupler design, germanium-on-silicon photodetector structures, wavelength-division multiplexing integration, and Mach-Zehnder modulator driver architectures.
Status at Closing: Dr. Whitfield's engagement has concluded. No further work is anticipated. All final invoices have been received and paid in full.
9.2 Dr. Lawrence Kessler — Apex Claim Analytics LLC
Location: Chicago, Illinois.
Date of Retention: October 2022.
Scope of Engagement: Dr. Kessler was retained to develop a reasonable royalty damages analysis under the Georgia-Pacific framework for use at trial. Dr. Kessler is an economist and damages expert with extensive experience in patent infringement damages calculations in the semiconductor and electronics industries.
Work Performed: Dr. Kessler developed a preliminary damages framework, including identification of the relevant royalty base, analysis of comparable license agreements, and a draft Georgia-Pacific factor analysis addressing the fifteen factors set forth in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). The damages analysis was in progress at the time of settlement, and Dr. Kessler's expert report was never finalized or served.
Status at Closing: Dr. Kessler's engagement has concluded. No further work is anticipated. All final invoices have been received and paid in full. Dr. Kessler's draft work product and preliminary analyses are maintained in the matter file as attorney work product.
10. Third-Party Notifications
First Pacific Commerce Bank, N.A.: In April 2023, C&H assisted OWS in preparing and sending a notification letter to First Pacific Commerce Bank, N.A. ("FPCB"), advising FPCB that the litigation styled Optiwave Semiconductor Corp. v. Lumos Photonics, Inc., Case No. 5:22-cv-03417-EJD, has been resolved by walk-away settlement and dismissed with prejudice by Order of the Court entered April 18, 2023. The notification letter confirmed that: (i) no payment was made in either direction; (ii) no license or other encumbrance was imposed on OWS's intellectual property assets, including the patents subject to FPCB's security interest under the revolving credit facility; and (iii) the litigation is fully concluded with all claims and counterclaims dismissed with prejudice.
The initial litigation notification to FPCB was sent on June 6, 2022, at the time of filing of the Complaint. The April 2023 resolution notification completes OWS's reporting obligations to FPCB with respect to this litigation under the credit facility covenants.
11. Protective Order Compliance and Return of Confidential Materials
On September 9, 2022, the Court entered a Stipulated Protective Order governing the treatment of confidential information produced by both parties in the course of discovery. The Protective Order established two tiers of confidentiality designation: (i) "Confidential" and (ii) "Highly Confidential — Attorneys' Eyes Only."
During the course of discovery, both OWS and Lumos produced documents and information designated under one or both tiers of the Protective Order. C&H received and maintained custody of confidential and Highly Confidential — Attorneys' Eyes Only materials produced by Lumos in accordance with the terms of the Protective Order.
Pursuant to the post-termination provisions of the Protective Order, C&H is required to return or destroy all confidential materials received from Lumos Photonics, Inc. within sixty (60) days of the conclusion of the case (i.e., by June 17, 2023). The specific obligations under the Protective Order include:
(a) Return or destruction of all documents, copies, excerpts, and summaries of documents designated as "Confidential" or "Highly Confidential — Attorneys' Eyes Only" by Lumos;
(b) Deletion of all electronic copies of such materials from C&H's document management system, litigation support databases, and any other electronic repositories;
(c) Written certification to counsel for Lumos (Brannick Howell & Stein LLP) confirming the completion of the return or destruction of all such materials; and
(d) Retention of a single archival copy of designated materials, if necessary, solely for the purpose of resolving any disputes that may arise regarding compliance with the Protective Order, in accordance with the Protective Order's archival provision.
In April 2023, C&H sent a letter to Sandra Ellison at OWS outlining the procedures for return or destruction of confidential materials received from Lumos under the Protective Order and requesting OWS's confirmation of its own compliance with the Protective Order's post-termination provisions with respect to any Lumos confidential materials in OWS's possession, custody, or control.
C&H is in the process of completing the return and destruction of all Lumos confidential materials. The written certification of destruction is expected to be submitted to BHS within the 60-day period following case closure.
12. File Retention and Destruction Instructions
12.1 Retention Policy