CALDERWOOD & HARKNESS LLP One Embarcadero Center, 34th Floor San Francisco, California 94111 Telephone: (415) 773-5000
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
January 27, 2023
Matter Number: 1014-00003
FROM: Alan Ngo, Responsible Partner, intellectual Property Group, Calderwood & Harkness LLP
TO:
Sandra Ellison, General Counsel Optiwave Semiconductor Corp. 2775 Augustine Drive, Suite 400 San Jose, California 95054
Rebecca Torres, Operating Partner (Semiconductor Sector) Vantage Point Capital Partners 2600 Sand Hill Road, Suite 200 Menlo Park, California 94025
CC:
Marcus Delgado, Billing Partner, Calderwood & Harkness LLP Theodore "Ted" Marchetti, VP of intellectual Property, Optiwave Semiconductor Corp. Douglas Fairbanks III, Managing Partner, Vantage Point Capital Partners Fund IV, LP
RE: Matter Status Report — Optiwave Semiconductor Corp. v. Lumos Photonics, Inc., Case No. 5:22-cv-03417-EJD (N.D. Cal.)
Reporting Period: October 16, 2022 through January 27, 2023
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1. Executive Summary
This memorandum provides a comprehensive status report on the above-referenced matter covering the period from October 16, 2022 through January 27, 2023. The matter is now entering its most critical phase: the Markman (claim construction) hearing, which is scheduled for January 30, 2023, before the Honorable Edward J. Torvelis of the United States District Court for the Northern District of California, San Jose Division.
The claim construction briefing is now complete. OWS filed its Opening Claim Construction Brief on December 5, 2022. Lumos Photonics, Inc. ("Lumos" or "Defendant") filed its Responsive Claim Construction Brief on December 19, 2022. OWS's Reply Brief was filed on January 9, 2023, and Lumos filed a Sur-Reply on January 19, 2023, by leave of Court. The briefing addresses eleven (11) disputed claim terms spanning all four asserted patents: U.S. Patent Nos. 10,234,567 (the "'567 Patent"); 10,891,234 (the "'234 Patent"); 11,045,678 (the "'678 Patent"); and 11,312,890 (the "'890 Patent").
In parallel with the claim construction phase, fact discovery is proceeding. Document productions from both parties are ongoing, and Calderwood & Harkness has engaged in meet-and-confer activity with Defendant's counsel regarding material deficiencies in Lumos's document production, particularly with respect to technical design documents, source code, and revenue data necessary for OWS's damages analysis. If these deficiencies are not cured, a motion to compel may be necessary.
Expert engagement continues to progress. Dr. Harold Whitfield of Whitfield Technical Consulting Group, Inc. has provided his Declaration in support of OWS's claim construction positions and has finalized a technical tutorial presentation for the Markman hearing. Dr. Lawrence Kessler of Apex Claim Analytics LLC has begun developing the damages framework under a reasonable royalty theory.
As detailed in the budget section below, total fees and costs to date are approximately $2,020,000, which represents approximately 48% of the Board-approved $4.2 million litigation budget through trial. The matter remains within the budget parameters established in the September 2022 budget memorandum.
We wish to emphasize to both OWS management and to Vantage Point Capital Partners that the outcome of the Markman hearing will be largely determinative of the trajectory, value, and ultimate resolution posture of this case. A favorable claim construction order will preserve OWS's infringement theories against Lumos's accused products and position OWS for strong leverage in any settlement discussions or at trial. An unfavorable order adopting Lumos's narrow constructions could substantially weaken or foreclose OWS's infringement case on multiple patents. We address these risks candidly throughout this report.
2. Case Background and Posture
OWS filed its Complaint for Patent Infringement on June 3, 2022, in the United States District Court for the Northern District of California, San Jose Division. The Complaint asserts infringement of four OWS-owned patents by two Lumos products: (1) the LumosBridge™ 800G Optical Engine and (2) the LumosEdge™ 400ZR+ Pluggable Transceiver. These products are next-generation silicon photonics-based coherent optical interconnect modules manufactured and sold by Lumos Photonics, Inc.
Defendant Lumos Photonics, Inc. is a publicly traded semiconductor company listed on the Nasdaq stock exchange under the ticker symbol LMPH. Lumos is headquartered in Austin, Texas and maintains fabrication facilities in Hillsboro, Oregon, as well as a Silicon Valley design and sales office at 4750 Great America Parkway, Suite 320, Santa Clara, California. Lumos was served with the Complaint on June 28, 2022, via its registered agent, Ashgrove Services Inc..
Lumos filed its Answer and Counterclaims on July 29, 2022. The counterclaims seek declaratory judgment of non-infringement and invalidity of all four asserted patents under 35 U.S.C. §§ 102 (anticipation), 103 (obviousness), and 112 (indefiniteness and written description/enablement). OWS's Answer to Lumos's Counterclaims was timely filed in August 2022, denying all material allegations.
The Initial Case Management Conference was held on August 15, 2022, at which the Court set the current Markman hearing date and established the initial case schedule. The case is proceeding under the Northern District of California's Patent Local Rules, which govern the claim construction process, initial infringement and invalidity contentions, and related discovery.
Defendant's Counsel. Lumos is represented by Brannick Howell & Stein LLP ("BHS"), a prominent IP litigation firm. The lead partner on the matter is Victoria "Tori" Ashworth of BHS's San Francisco office, who is widely regarded as one of the most aggressive and effective patent litigators in the Northern District. The associate team lead is Daniel Kowalski, also of BHS's San Francisco office. BHS has also engaged Dr. Raymond Ng, Of Counsel at BHS, who serves as a technical consultant and is expected to present Lumos's technical tutorial at the Markman hearing. Ms. Ashworth's reputation and skill level are well known to our team; her involvement underscores the seriousness with which Lumos is defending this matter.
Damages Overview. OWS's claimed damages exceed $75 million based on a reasonable royalty theory. The damages framework applies an estimated 7.5% royalty rate to approximately $148.6 million in accused product revenue for calendar year 2022. The damages calculation also includes pre-suit damages for the period during which Lumos had notice of OWS's patent rights and a potential willfulness enhancement under 35 U.S.C. § 284, given evidence that Lumos was aware of OWS's patents prior to the launch of the accused products. Additional refinement of the damages model is ongoing and dependent upon the outcome of claim construction and further discovery from Lumos regarding product-level revenue data.
Ownership Structure. As background context relevant to Vantage Point's involvement, we note that Optiwave Semiconductor Corp. is majority-owned by Vantage Point Capital Partners Fund IV, LP, which holds an approximate 62% equity stake in OWS. Vantage Point's operating partner for the semiconductor sector, Rebecca Torres, is an active participant in the strategic oversight of this litigation, and Douglas Fairbanks III, Managing Partner of Fund IV, is copied on this report in accordance with the established communication protocol.
3. Claim Construction Briefing — Completed
3.1 Briefing Schedule and Filings
The claim construction briefing process is now complete. The parties filed the following briefs in accordance with the schedule set by the Court:
1. OWS's Opening Claim Construction Brief — Filed December 5, 2022 (45 pages). OWS's Opening Brief argued for broader constructions of the disputed claim terms grounded in the plain and ordinary meaning of the claim language as understood by a person of ordinary skill in the art of integrated silicon photonics. The brief is supported by the patent specifications, the prosecution histories of all four asserted patents, and the Declaration of Dr. Harold Whitfield, which provides expert testimony regarding the understanding of a person of ordinary skill in the art with respect to each of the eleven disputed terms. OWS's proposed constructions are designed to capture the full scope of the patented inventions as described in the specifications and as claimed, while remaining consistent with the intrinsic record.
2. Lumos's Responsive Claim Construction Brief — Filed December 19, 2022 (45 pages). Lumos's Responsive Brief advocates for narrow constructions across all key disputed terms. Lumos's strategy is evident: by narrowing the claim scope to exclude the specific architectures employed in the LumosBridge 800G and LumosEdge 400ZR+ products, Lumos seeks to avoid infringement as a matter of claim construction rather than through a factual defense on the merits at trial. Lumos's brief relies heavily on prosecution history estoppel arguments with respect to the '567 Patent and the '678 Patent, and on extrinsic evidence from Dr. Raymond Ng to support its proposed narrow constructions. Notably, Lumos's constructions would effectively import specific structural limitations from the preferred embodiments described in the specifications into the claim language itself — a practice that is disfavored under Federal Circuit precedent.
3. OWS's Reply Claim Construction Brief — Filed January 9, 2023 (15 pages). OWS's Reply Brief squarely rebutted Lumos's prosecution history estoppel arguments by demonstrating that the amendments made during prosecution of the '567 and '678 Patents were not made in response to prior art rejections that would trigger the narrow estoppel Lumos asserts. The Reply also challenged Lumos's reliance on Dr. Ng's extrinsic evidence, arguing that Dr. Ng's proposed constructions are inconsistent with the intrinsic record and improperly seek to narrow claim terms beyond what the specification and prosecution history support. Under Federal Circuit law, extrinsic evidence such as expert testimony may not be used to contradict or narrow the meaning of claim terms that are unambiguous in the context of the intrinsic record.
4. Lumos's Sur-Reply — Filed January 19, 2023 (15 pages), by leave of Court. Lumos sought and obtained leave to file a Sur-Reply addressing a narrowed subset of issues raised in OWS's Reply Brief. The Sur-Reply focuses primarily on the prosecution history of the '567 Patent and the '678 Patent, arguing that the applicants' remarks during prosecution constitute clear and unambiguous disclaimers of claim scope that must be given effect regardless of the specification language. The Sur-Reply also attempts to bolster Dr. Ng's extrinsic evidence with additional industry publications and technical standards documents.
All briefing materials, including supporting declarations, appendices, and claim charts, have been filed with the Court and are part of the record for the January 30, 2023 hearing.
3.2 Summary of the 11 Disputed Terms
The parties identified eleven (11) disputed claim terms across the four asserted patents. Below we summarize the four most consequential disputed terms — those that are most likely to affect the viability of OWS's infringement theories against the accused products. The remaining seven terms are addressed in the Joint Claim Construction and Prehearing Statement (Patent L.R. 4-3) filed October 14, 2022, and in the parties' respective briefs.
3.2.1 '567 Patent (U.S. Patent No. 10,234,567) — "adiabatically coupled"
OWS's Proposed Construction: "coupled such that optical mode transitions occur without significant power loss."
Lumos's Proposed Construction: "coupled through a gradual, continuous taper that prevents excitation of higher-order modes throughout the entire transition region."
Significance: This term is critical to OWS's infringement theory against both accused products. Lumos's LumosBridge 800G Optical Engine employs a segmented (non-continuous) taper design with discrete coupling sections rather than a single, gradual, continuous taper. If the Court adopts Lumos's proposed construction — which requires a "gradual, continuous taper" — Lumos's segmented taper design may fall outside the literal claim scope. Under OWS's broader construction, which focuses on the functional result (optical mode transition without significant power loss) rather than the specific taper geometry, Lumos's segmented design would be captured because it achieves the same adiabatic coupling result through a different structural approach.
3.2.2 '234 Patent (U.S. Patent No. 10,891,234) — "graded buffer layer having a continuously varying germanium concentration"
OWS's Proposed Construction: "a buffer layer in which the germanium concentration changes across the layer thickness."
Lumos's Proposed Construction: "a buffer layer in which the germanium atomic fraction increases monotonically and without step changes from the silicon substrate interface to the absorber layer."
Significance: Lumos's accused products utilize a step-graded SiGe buffer with four discrete composition steps (germanium atomic fractions of 0.25, 0.50, 0.75, and 1.0). The '234 Patent specification describes both "continuously graded" and "step-graded" buffer layers as embodiments of the invention. However, the claim language uses the term "continuously varying," which Lumos contends excludes step-graded designs by requiring a smooth, monotonic variation in germanium concentration without discrete steps. OWS's construction treats "continuously varying" more broadly to encompass any design in which the germanium concentration changes across the layer thickness, including step-graded approaches where the concentration varies (albeit discretely) from one interface to the other. This is a significant interpretive question, and Lumos will argue that the patentee's choice to use "continuously varying" in the claims, despite describing step-graded embodiments in the specification, reflects an intentional limitation.
3.2.3 '678 Patent (U.S. Patent No. 11,045,678) — "integrated wavelength-division multiplexing element monolithically formed on a single silicon die"
OWS's Proposed Construction: "a WDM component fabricated as part of the same semiconductor fabrication process on a single die."
Lumos's Proposed Construction: A construction that excludes hybrid integration, flip-chip bonding, or any heterogeneous integration technique.
Significance: Lumos's 800G platform uses micro-transfer-printed III-V gain elements bonded to the silicon photonic integrated circuit (PIC) — a form of heterogeneous integration. Under Lumos's proposed construction, which excludes any heterogeneous integration technique, the WDM element in Lumos's products would fall outside the claim scope if the Court determines that the III-V bonding process renders the overall integration non-monolithic. OWS contends that the WDM element itself is monolithically formed on the silicon die and that the presence of separately bonded III-V gain elements (which serve a different function — optical gain, not wavelength multiplexing) does not alter the monolithic character of the WDM element. This is a nuanced but critical distinction. During prosecution, the applicant added the "monolithically formed" limitation and made remarks distinguishing "heterogeneous integration approaches," which Lumos argues constitutes a clear disclaimer of any product that incorporates heterogeneous integration techniques in any portion of the photonic circuit.
3.2.4 '890 Patent (U.S. Patent No. 11,312,890) — "pre-emphasis equalization stage electrically co-integrated with the modulator on a common substrate"
OWS's Proposed Construction: "an equalization circuit located on the same substrate as the modulator."
Lumos's Proposed Construction: A construction requiring fabrication in the same semiconductor process, sharing doping profiles and process layers, without bond wires, interposers, or package-level routing.
Significance: Lumos's accused products use a separate CMOS driver die that is flip-chip bonded via copper pillar micro-bumps to the silicon photonic modulator substrate. Under Lumos's proposed construction, the separate driver die would not be "co-integrated" because it is fabricated in a different process and bonded rather than monolithically fabricated on the modulator substrate. OWS argues that "co-integrated" means located on the same substrate and electrically connected, which encompasses the flip-chip bonded configuration. However, the prosecution history of the '890 Patent presents a challenge: the "co-integrated" limitation was added during prosecution specifically to distinguish prior art that disclosed separately fabricated and bonded driver circuits. This prosecution history provides support for Lumos's narrow reading and represents one of the more significant risks in the claim construction proceeding.
3.2.5 Remaining Disputed Terms
The remaining seven disputed terms involve subsidiary claim limitations that, while important to the overall claim scope, are generally less likely to be dispositive of OWS's infringement theories. These terms are fully briefed in the parties' claim construction papers and are addressed in the proposed constructions chart submitted in October 2022 and in the Joint Claim Construction and Prehearing Statement (Patent L.R. 4-3) filed October 14, 2022. We will address these terms in more detail in our post-Markman assessment if the Court's constructions of these terms raise additional issues.
3.3 Assessment of Claim Construction Risks
We provide the following candid assessment of the risks associated with the upcoming Markman hearing, as we believe it is essential that OWS management and Vantage Point understand the range of possible outcomes as they consider the strategic posture of this matter.
Overall Assessment. The outcome of the Markman hearing will be pivotal to the future of this litigation. The principal risk lies in the Court's adoption of Lumos's narrow constructions, which are specifically designed to exclude the architectural features of the accused LumosBridge 800G and LumosEdge 400ZR+ products from the claim scope across multiple patents. If the Court adopts narrow constructions on even two of the four key terms identified above, the infringement case would be materially weakened.
Prosecution History Estoppel. Prosecution history estoppel is a material concern for two of the four asserted patents:
'567 Patent: The term "adiabatically coupled" was added during prosecution to overcome the Tanaka prior art reference, U.S. Patent No. 9,456,012. The Tanaka patent was co-invented by Hideo Tanaka — who is, ironically, now an employee of OWS and a named inventor on the '567 Patent. During prosecution, the applicant distinguished the Tanaka reference by arguing that Tanaka's coupler design did not achieve adiabatic coupling as claimed. Lumos contends that this amendment and the accompanying remarks narrow the scope of "adiabatically coupled" to the specific gradual, continuous taper geometry described in the preferred embodiment. While we believe that the prosecution history does not compel such a narrow reading, the argument is not without force, and we acknowledge the risk.
'678 Patent: The term "monolithically formed" was added during prosecution to overcome several hybrid integration references. The applicant's prosecution remarks expressly distinguished "heterogeneous integration approaches" and stated that the claimed invention was directed to a fully monolithic solution. Lumos argues that these remarks constitute a clear and unambiguous disclaimer of any product incorporating heterogeneous integration techniques. OWS's position is that the disclaimer was directed to the specific hybrid integration approaches disclosed in the cited prior art and does not extend to all forms of heterogeneous integration, particularly where the WDM element itself is monolithically formed on the silicon die. This is a close question, and the Court's resolution of it will depend on a careful reading of the prosecution history.
'234 Patent — Specification Language. The '234 Patent specification describes both "continuously graded" and "step-graded" buffer layers as embodiments of the claimed invention. However, the claim language uses only "continuously varying" to describe the germanium concentration profile. Lumos argues that the patentee's decision to use "continuously varying" in the claims — while describing step-graded alternatives in the specification — reflects a deliberate choice to limit the claims to continuously graded designs and to exclude step-graded approaches. Under Federal Circuit precedent, a patentee may not recapture through claim construction subject matter that was deliberately excluded from the claims. This is a meaningful risk, though OWS's position is that "continuously varying" as understood by a person of ordinary skill in the art encompasses both smooth and step-graded variations.
'890 Patent — Prosecution History. The "co-integrated" limitation in the '890 Patent was added during prosecution to distinguish prior art that disclosed separately fabricated and bonded driver circuits. The prosecution history provides direct support for Lumos's narrow reading of "co-integrated" as requiring fabrication in the same semiconductor process on the same substrate. This is perhaps the most challenging claim construction issue for OWS, and we have been transparent with the client about this risk throughout the briefing process.
Calderwood & Harkness's Position. Notwithstanding these risks, C&H's position is that OWS's proposed constructions are well-supported by the intrinsic record and reflect the plain and ordinary meaning of the disputed terms as understood by persons of ordinary skill in the art of integrated silicon photonics. Dr. Whitfield's Declaration provides robust expert support for OWS's constructions, and OWS's briefing has addressed Lumos's prosecution history estoppel arguments with specificity and force. However, we acknowledge meaningful risk on several terms, and we believe it is prudent for OWS and Vantage Point to be prepared for the possibility of unfavorable constructions on one or more key terms.
4. Markman Hearing Preparation — January 30, 2023
4.1 Hearing Logistics
The Markman hearing is scheduled for January 30, 2023, before the Honorable Edward J. Torvelis at the Robert F. Peckham Federal Building and United States Courthouse, 280 South 1st Street, San Jose, California. The Court has allotted 6.5 hours for the hearing, reflecting the complexity of the eleven disputed claim terms and the technical subject matter involved. The hearing will include technical tutorials from each side, followed by oral argument on the disputed terms.
4.2 Technical Tutorial
Dr. Harold Whitfield of Whitfield Technical Consulting Group, Inc. (Palo Alto, California) will present a technical tutorial on behalf of OWS at the outset of the hearing. The tutorial is designed to provide Judge Torvelis with the technical background necessary to evaluate the parties' proposed claim constructions. The tutorial will cover the following topics:
• Silicon photonics fundamentals and the evolution of photonic integrated circuits;
• Waveguide coupling physics, including the distinction between adiabatic and non-adiabatic optical mode transitions, and the role of taper geometry in achieving low-loss coupling;
• Germanium-on-silicon photodetector architectures, with specific attention to continuously graded versus step-graded SiGe buffer layers and their functional equivalence in managing lattice mismatch;
• Monolithic versus heterogeneous integration techniques in silicon photonic platforms, including the distinction between wafer-level monolithic fabrication and die-level heterogeneous bonding;
• Mach-Zehnder modulator (MZM) driver co-integration approaches, including the distinction between monolithic co-integration and flip-chip bonded driver circuits.
Dr. Whitfield's tutorial materials have been finalized and consist of a Northgate Services Inc. presentation with clear, annotated diagrams. Lumos's technical tutorial will be presented by Dr. Raymond Ng, Of Counsel at BHS.
4.3 Demonstrative Presentation
C&H has prepared a comprehensive demonstrative presentation for use during oral argument. The demonstrative materials include:
• Annotated patent figures from each of the four asserted patents, highlighting the disputed claim terms in context;
• Prosecution history timelines for the '567, '678, and '890 Patents, showing the sequence of office actions, amendments, and applicant remarks relevant to the estoppel arguments;
• Side-by-side comparison charts of the parties' proposed constructions for each disputed term;
• Diagrams of the accused LumosBridge 800G Optical Engine and LumosEdge 400ZR+ Pluggable Transceiver products, annotated to show how these products practice the asserted claims under OWS's proposed constructions.
These demonstrative materials have been shared with opposing counsel in advance of the hearing, as required by the Court's standing order on demonstrative exhibits.
4.4 Argument and Attendance
Alan Ngo will present oral argument on behalf of OWS. Victoria Ashworth will argue for Lumos.
The following team members will attend the hearing:
• Alan Ngo, Partner, Calderwood & Harkness LLP — oral argument
• Omar Siddiqui, Senior Associate, Calderwood & Harkness LLP — second chair and bench support
• Christy Bauer, Associate, Calderwood & Harkness LLP — logistics and demonstrative coordination
• Dr. Harold Whitfield, Whitfield Technical Consulting Group, Inc. — technical tutorial and expert support
• Ted Marchetti, VP of intellectual Property, OWS — client observer
• Dr. Kevin Fong, Senior Staff Engineer, OWS — client technical observer
4.5 Post-Hearing Expectations
Following the hearing, the Court may issue its Markman Order from the bench or may take the matter under submission for further consideration. Based on Judge Torvelis's typical practice in patent cases, we anticipate that the Court will issue a written order within 2–4 weeks of the hearing, though the timing is ultimately at the Court's discretion and may be longer if the Court finds the issues particularly complex. We will promptly notify OWS and Vantage Point of any bench ruling and will provide a comprehensive analysis upon receipt of a written order.
5. Fact discovery Status
5.1 Document discovery
Fact discovery is proceeding in parallel with the claim construction phase. The principal written discovery exchanged to date includes the following:
Requests for Production:
• OWS's First Set of Requests for Production (112 requests) was served on Lumos on November 21, 2022. Lumos's responses and initial document productions were received in late December 2022 and early January 2023. The production to date consists of approximately 85,000 documents comprising approximately 1.2 million pages, hosted on Lumos's designated document review platform.
• Lumos's First Set of Requests for Production (98 requests) was served on OWS on November 7, 2022. OWS's Responses and Objections were served in December 2022. OWS has produced documents on a rolling basis in accordance with the production schedule agreed upon by the parties and memorialized in the Case Management Order. OWS's production to date includes technical documents, internal communications, patent prosecution files, licensing history, and financial data, subject to the limitations set forth in OWS's objections and the Stipulated Protective Order.
Interrogatories:
• OWS's First Set of Interrogatories (25 interrogatories, the maximum permitted under the Federal Rules) was served on Lumos on November 21, 2022. Lumos's responses are due and have been partially received.
• Lumos's First Set of Interrogatories was served on OWS in November 2022. OWS's responses were served in December 2022.
5.2 discovery Deficiencies and Meet-and-Confer
Calderwood & Harkness sent a detailed meet-and-confer letter to Daniel Kowalski at BHS in January 2023 identifying significant deficiencies in Lumos's document production and interrogatory responses. The principal deficiencies are as follows:
1. Technical Design Documents. Lumos's production of technical design documents for the LumosBridge 800G Optical Engine and LumosEdge 400ZR+ Pluggable Transceiver — the accused products — is incomplete. OWS's requests specifically seek design files, mask layouts, process flow documents, characterization data, and engineering notebooks related to the accused product architectures, including the segmented taper coupler, step-graded SiGe buffer, micro-transfer-printed III-V elements, and flip-chip bonded CMOS driver die. The documents produced to date are insufficient to allow OWS's technical expert to conduct a thorough infringement analysis.
2. Source Code. Source code for the driver circuit firmware — which is relevant to the '890 Patent's "pre-emphasis equalization stage" limitation — has not yet been produced. OWS has requested production of this source code in a secure, inspectable format consistent with the source code provisions of the Stipulated Protective Order.
3. Revenue Breakdowns. Lumos's financial data production provides only aggregate revenue figures for its photonics product line. OWS's damages analysis requires revenue breakdowns by product configuration — specifically, separate revenue figures for the LumosBridge 800G and LumosEdge 400ZR+ products, further broken down by customer, geography, and sales channel. This level of detail is essential for Dr. Kessler to apply the Georgia-Pacific framework to the approximately $148.6 million in combined accused product revenue identified in Lumos's public filings and SEC disclosures.
Our meet-and-confer letter requested that Lumos supplement its production and interrogatory responses within 14 days. If Lumos fails to provide adequate supplementation, we may need to file a motion to compel under Federal Rule of Civil Procedure 37(a). A motion to compel would add to costs and could affect the discovery timeline, though it would also generate a Court order that would provide a stronger enforcement mechanism for future discovery compliance. We will keep OWS and Vantage Point apprised of the progress of the meet-and-confer process and will seek client input before filing any motion.
5.3 ESI and Document Review
Internal Document Collection. Collection of electronically stored information ("ESI") and hard-copy documents from OWS custodians is substantially complete. The following OWS custodians have been identified and their documents collected:
• Dr. Priya Ramanathan (Chief Technology Officer)
• Dr. Kevin Fong (Senior Staff Engineer; named inventor on the '567, '234, and '890 Patents)
• Dr. Amara Osei (Director of Photonic Integration; named inventor on the '234 and '678 Patents)
• Ted Marchetti (VP of intellectual Property)
• Sandra Ellison (General Counsel)
• Rajesh Iyer (VP of Product Engineering)
• Liwei Zhang (Senior Process Engineer)
• Hideo Tanaka (Principal Scientist; named inventor on the '567 Patent and co-inventor of the Tanaka prior art, U.S. Patent No. 9,456,012)
Document Review Protocol. A comprehensive document review protocol was implemented pursuant to our November 2022 internal memorandum. The review protocol includes: (a) a privilege review workflow to ensure that privileged and work-product-protected communications are identified and withheld or redacted prior to production; (b) responsiveness coding to classify documents by relevance to specific issues (infringement, validity, damages, willfulness); and (c) confidentiality designation under the Stipulated Protective Order, which was entered by the Court in September 2022. Documents are being designated as "Confidential," "Highly Confidential — Attorneys' Eyes Only," or "Highly Confidential — Source Code" as appropriate.
Privilege Log. A rolling privilege log is being maintained as documents are reviewed and withheld on privilege grounds. The privilege log will be consolidated and served in a final form at the close of fact discovery, as required by the Federal Rules and the Court's Case Management Order.
5.4 Claim Construction discovery (Completed)
Claim-construction-related discovery closed on October 31, 2022, as scheduled by the Court. During the claim construction discovery period, the following depositions were completed:
• Dr. Kevin Fong — Named inventor on the '567, '234, and '890 Patents. Dr. Fong testified regarding the development of the claimed inventions, his understanding of the disputed claim terms, and the prosecution history of the patents.
• Hideo Tanaka — Named inventor on the '567 Patent and co-inventor of the prior art reference U.S. Patent No. 9,456,012 (the "Tanaka patent"). Mr. Tanaka testified regarding his work on both the prior art patent (developed before he joined OWS) and his contributions to the '567 Patent, including his understanding of "adiabatic coupling" in the context of the claimed invention.
• Dr. Amara Osei — Named inventor on the '234 and '678 Patents. Dr. Osei testified regarding the development of the germanium-on-silicon photodetector architecture and the monolithic WDM integration techniques claimed in these patents.
In addition, prosecution history review was completed for all four asserted patents. The prosecution histories, including all office actions, amendments, applicant remarks, and examiner interview summaries, have been analyzed and are reflected in OWS's claim construction briefing.
6. Expert Engagement Update
6.1 Technical Expert — Dr. Harold Whitfield
Firm: Whitfield Technical Consulting Group, Inc., 530 Lytton Avenue, Suite 210, Palo Alto, California 94301.
Engagement. Dr. Whitfield was retained pursuant to an engagement agreement dated August 2022. The scope of his engagement covers claim construction support, infringement analysis, and the preparation and delivery of a technical tutorial for the Markman hearing. Dr. Whitfield's work to date has focused on the claim construction phase, and he will transition to infringement analysis following the Markman hearing.
Claim Construction Work Product. Dr. Whitfield submitted his Declaration in Support of OWS's Opening Claim Construction Brief in December 2022. The Declaration provides detailed opinions regarding the understanding of a person of ordinary skill in the art ("POSITA") for each of the eleven disputed claim terms. Dr. Whitfield's analysis is grounded in his extensive expertise in silicon photonics and integrated photonic circuit design, and his opinions are consistent with and supported by the intrinsic record (patent specifications and prosecution histories).
Technical Tutorial. Dr. Whitfield's technical tutorial presentation materials have been finalized for the January 30, 2023 hearing. The tutorial is designed to be accessible to a non-specialist audience while providing sufficient technical depth to illuminate the key claim construction issues.
Post-Markman Scope. Following the Markman hearing and receipt of the Court's claim construction order, Dr. Whitfield will transition to preparing his infringement opinions for each accused product under the Court's adopted constructions. If warranted by the claim constructions, Dr. Whitfield will prepare a formal expert report on infringement during the expert discovery phase. The timing and scope of this work will depend on the Markman outcome and the revised case schedule.
Credentials. Dr. Whitfield holds a Ph.D. in Electrical Engineering with a specialization in photonics from the University of California, Berkeley. He is Professor Emeritus at the University of California, Santa Barbara, where he held a chaired professorship in the Department of Electrical and Computer Engineering for over 25 years. He has authored more than 200 publications in the field of integrated photonics, including seminal papers on silicon photonic waveguide design and optical mode coupling. Dr. Whitfield is a Fellow of the IEEE and the Optical Society of America.
6.2 Damages Expert — Dr. Lawrence Kessler
Firm: Apex Claim Analytics LLC, 150 North Michigan Avenue, Suite 2400, Chicago, Illinois 60601.
Engagement. Dr. Kessler was retained pursuant to an engagement agreement dated October 2022. The scope of his engagement covers reasonable royalty analysis, lost profits analysis if applicable, and rebuttal of Defendant's damages positions. Dr. Kessler is one of the country's most experienced patent damages experts and has been qualified as an expert in over 40 patent infringement cases in federal courts nationwide.
Preliminary Work. A preliminary damages framework memorandum was provided to Dr. Kessler in November 2022, outlining OWS's reasonable royalty theory under 35 U.S.C. § 284 using the Georgia-Pacific fifteen-factor analysis framework. Dr. Kessler has reviewed this memorandum and has begun developing his damages model.
In January 2023, Dr. Kessler's team prepared a draft Georgia-Pacific factor analysis framework identifying the key inputs required for the damages model. The principal inputs identified include:
• Accused product revenue: Approximately $148.6 million for CY 2022 (combined LumosBridge 800G and LumosEdge 400ZR+ revenue), with approximately $62.3 million attributable to the pre-suit period (Q1–Q2 2022);
• OWS patent portfolio valuation: An independent valuation conducted by Clearpath IP Valuation Services estimated the portfolio-level value of OWS's patent portfolio at $215 million, with $42.8 million attributable specifically to the four asserted patents;
• Comparable license agreements: Research is ongoing to identify and analyze comparable licenses in the silicon photonics and integrated semiconductor spaces; OWS's existing licensing history and any third-party licenses involving the same or similar technology will be considered;
• Hypothetical negotiation framework: The Georgia-Pacific analysis assumes a hypothetical negotiation between a willing licensor (OWS) and a willing licensee (Lumos) at the time infringement began, taking into account the factors that would have influenced the parties' respective bargaining positions.
Preliminary Royalty Rate Estimate. Based on the preliminary analysis conducted to date, the estimated reasonable royalty rate is 7.5%. This estimate is subject to refinement as additional data becomes available, including product-level revenue breakdowns from Lumos's discovery production and the final claim scope as determined by the Court's Markman order.
Expert Report Timeline. Dr. Kessler's formal expert report is not due until the expert discovery phase of the case. The timing of expert reports will depend on the Markman outcome and any revisions to the case schedule.
Credentials. Dr. Kessler holds a Ph.D. in Economics from Northwestern University. He specializes in patent damages and reasonable royalty analysis and has provided expert testimony in matters involving aggregate damages in excess of $15 billion. He is a frequent speaker and author on topics related to intellectual property valuation and damages methodology.
Opposing Expert. We note that Lumos has retained Compass Forensic Accounting LLP (Dallas, Texas) to rebut OWS's damages theories. Lumos's designated damages expert is Dr. Patricia Moreno, CPA, ABV, a partner at Compass Forensic Accounting. Dr. Moreno is a credentialed business valuator with experience in patent damages defense, and we expect her to challenge both the royalty rate and the royalty base in OWS's damages model.
7. Invalidity and Prior Art Considerations
Lumos's counterclaims assert invalidity of all four asserted patents under 35 U.S.C. §§ 102 (anticipation), 103 (obviousness), and 112 (indefiniteness, written description, and enablement). While the invalidity defense will be fully briefed during the summary judgment and trial phases of the case, the prior art references cited by Lumos are relevant to the claim construction analysis and merit discussion in this report.
The key prior art references cited by Lumos in its claim construction contentions and responsive briefing include:
1. Tanaka et al. (U.S. Patent No. 9,456,012) — Issued September 6, 2016. This patent was co-invented by Hideo Tanaka before he joined OWS. It discloses a waveguide coupler design that Lumos asserts anticipates the claims of the '567 Patent under § 102(a)(1). As noted above, the '567 Patent was prosecuted over this reference, and the "adiabatically coupled" limitation was added during prosecution to distinguish the Tanaka coupler. The Tanaka reference is therefore central both to the claim construction analysis and to Lumos's anticipation defense.
2. Chen & Liu, "Segmented Taper Coupler Design for Low-Loss Fiber-to-Chip Coupling," *Journal of Photonic Integration*, Vol. 14, No. 3, pp. 217–229 (2016) — This publication discloses segmented taper coupler designs and is cited by Lumos against the '567 Patent under § 103, arguing that the combination of Tanaka and Chen & Liu renders the '567 Patent claims obvious.
3. European Patent Application EP 3,234,567 A1 — Published August 2, 2017; applicant: Nordlicht Photonische GmbH. This European patent application discloses a germanium-on-silicon photodetector with a graded SiGe buffer layer and is cited against the '234 Patent under § 102(a)(2).
4. Iyer & Patel, "Co-Design of Modulator Drivers and Silicon Photonic Mach-Zehnder Structures," *IEEE Transactions on Circuits and Systems*, Vol. 65, No. 8, pp. 2701–2713 (2018) — This publication discloses a co-designed MZM driver architecture and is cited against the '890 Patent under § 103.
Our prior Validity Risk Assessment Memorandum, prepared in May 2022 during the pre-filing investigation, addressed each of these references in detail. We continue to believe that the asserted claims of all four patents are valid and that OWS has strong arguments to overcome Lumos's invalidity defenses. However, the invalidity defense adds complexity and risk to the overall litigation, and the claim construction outcome will shape the invalidity analysis as well — broader constructions may expose the claims to a wider range of prior art, while narrower constructions may bolster validity but weaken infringement.
Full invalidity briefing will occur during the summary judgment and/or trial phases of the case. We will continue to monitor and assess the invalidity risks as discovery progresses and additional prior art is identified.
8. Budget and Fee Summary
8.1 Fees and Costs to Date (as of January 27, 2023)
The following is a summary of fees and costs incurred in this matter from inception through the current reporting period:
Calderwood & Harkness Fee Detail. Legal fees billed to date of approximately $1,450,000 reflect cumulative billings through the January 2023 billing period. Fees are calculated at blended hourly rates with a 10% volume discount on standard rates, as negotiated in the engagement letter. The effective hourly rates for the principal timekeepers are as follows:
Costs and Disbursements. The $210,000 in costs and disbursements includes court filing fees, service of process costs, travel expenses, and printing, graphics, and production costs for demonstrative exhibits and claim construction presentations. This figure is estimated and will be confirmed in the next monthly invoice.
Expert Fees. Dr. Whitfield's fees of approximately $280,000 reflect his work on the claim construction declaration, technical tutorial preparation, consulting on claim construction strategy, and review of technical materials related to the accused products. Dr. Kessler's fees of approximately $80,000 reflect preliminary damages framework development, review of financial data, and initial Georgia-Pacific factor analysis.
8.2 Budget Tracking Against Board-Approved Budget
The Board-approved litigation budget for this matter through trial is $4.2 million. The current estimated spend of approximately $2,020,000 represents approximately 48% of the total budget.
The claim construction phase has been the most cost-intensive phase of the litigation to date, as anticipated in the September 2022 budget memorandum. Significant resources were devoted to claim construction briefing (including the Opening Brief, Reply Brief, supporting declarations, demonstrative exhibits, and hearing preparation), claim construction discovery (including three inventor depositions and prosecution history review), and expert engagement (Dr. Whitfield's claim construction declaration and technical tutorial).
The remaining budget of approximately $2,180,000 must cover the following phases: completion of fact discovery (including any motion to compel); expert reports and expert depositions; dispositive motions (including summary judgment on claim construction, infringement, invalidity, and damages); pretrial preparation; and trial. We believe this budget allocation is adequate, but note that the Markman outcome will significantly affect the remaining budget trajectory:
• If claim constructions are favorable to OWS: The remaining phases will require the full budgeted amount, as the case will proceed through expert discovery, dispositive motions, and trial. Settlement discussions may be initiated from a position of strength, but trial preparation costs should be anticipated.
• If claim constructions are unfavorable to OWS: The matter may resolve at a substantially lower total cost, either through voluntary dismissal, settlement on defense-favorable terms, or streamlined dispositive motions. In this scenario, the remaining budget would not be fully consumed.
• If claim constructions are mixed: The remaining budget trajectory will depend on the specific constructions adopted and the extent to which OWS's infringement theories remain viable. A mixed result may present opportunities for settlement discussions or may require strategic narrowing of the asserted claims and patents.
We will provide an updated budget forecast following receipt of the Markman Order.
8.3 Retainer Status
The engagement letter provides for an evergreen retainer of $100,000, replenished on a quarterly basis. Retainer deposits received to date are as follows:
The retainer is applied against fees in accordance with the terms of the engagement letter. Monthly invoices are issued for amounts exceeding the retainer application in any given billing period.
9. Lender Notification Update
In compliance with the covenants of OWS's $40 million revolving credit facility with First Pacific Commerce Bank, N.A. (345 Montgomery Street, San Francisco, California 94104), a material litigation notification letter was sent to FPCB on June 6, 2022, promptly following the filing of the Complaint. The notification letter disclosed the nature of the litigation, the parties involved, the patents at issue, and the potential financial exposure.
FPCB holds a security interest in OWS's intellectual property assets as collateral under the revolving credit facility. The asserted patents are included within the scope of this lien. No further action or notification to FPCB is required at this time under the terms of the credit agreement.
However, should the Markman outcome result in a significant change to the litigation posture — whether favorable or unfavorable — we recommend that OWS update FPCB as part of its ongoing credit facility covenant compliance obligations. In particular, if the case resolves on unfavorable terms or if the patents are found invalid, FPCB may need to reassess the collateral value of the IP portfolio. Conversely, a favorable outcome and potential recovery of damages would be relevant to OWS's overall financial position and creditworthiness. Sandra Ellison's office should coordinate any such notification with C&H to ensure consistency of messaging.
10. Upcoming Milestones and Next Steps
The following milestones and action items are anticipated in the near term:
January 30, 2023 — Markman Hearing. The Markman hearing will take place before Hon. Edward J. Torvelis at the Robert F. Peckham Federal Building and U.S. Courthouse in San Jose. The hearing is allotted 6.5 hours and will include technical tutorials and oral argument. All team members and experts are fully prepared.
Post-Hearing (estimated February–March 2023) — Markman Order. The Court is expected to issue its Markman Order within 2–4 weeks following the hearing, though the timing is at the Court's discretion. The order may be issued from the bench at the conclusion of the hearing, but based on Judge Torvelis's typical practice, a written order is more likely.
Upon Receipt of Markman Order — Post-Markman Impact Assessment. Immediately upon receipt of the Markman Order, C&H will prepare a comprehensive internal post-*Markman* impact assessment analyzing the viability of OWS's infringement theories under the Court's adopted constructions for each patent and each asserted claim. This assessment will include a claim-by-claim and product-by-product analysis of whether OWS's infringement case remains viable, and will form the basis for strategic recommendations regarding the next phase of the litigation.
Fact discovery (Ongoing). Document productions will continue in accordance with the discovery schedule. C&H will continue to pursue the meet-and-confer process with BHS regarding deficiencies in Lumos's production. If Lumos fails to provide adequate supplementation within the requested timeframe, C&H will seek client authorization to file a motion to compel under Rule 37(a).
Expert Work (Ongoing). Following the Markman hearing, Dr. Whitfield will transition to preparing his infringement analysis based on the Court's adopted claim constructions. Dr. Kessler will continue to refine his damages analysis as additional financial data becomes available from Lumos's discovery production. The scope and timing of formal expert reports will depend on the Markman outcome and the revised case schedule.
Board Communication. C&H will promptly report the Markman results to OWS management and Vantage Point Capital Partners, accompanied by a recommendation regarding next steps. This recommendation will address whether continued prosecution of the litigation is warranted, whether settlement discussions should be initiated (and on what terms), or whether other strategic alternatives should be considered.
11. Risk Assessment Summary
The following is a summary of the principal risks associated with this matter as of the date of this report:
Claim Construction Risk. The Markman hearing is the single most important near-term event in this litigation. The Court's claim construction order will largely determine whether OWS's infringement theories are viable against Lumos's accused products. If the Court adopts narrow constructions aligned with Lumos's proposals on the four key disputed terms — "adiabatically coupled" ('567 Patent), "continuously varying germanium concentration" ('234 Patent), "monolithically formed" ('678 Patent), and "co-integrated" ('890 Patent) — OWS's infringement case would be substantially weakened or potentially untenable as to one or more of the asserted patents.
Mitigation. OWS's claim construction briefing and expert evidence present strong arguments for broader constructions that are consistent with the plain and ordinary meaning of the claim language and supported by the intrinsic record. Dr. Whitfield's Declaration provides robust expert support for OWS's positions. However, Lumos's prosecution history estoppel arguments are not without force, particularly with respect to the '567, '678, and '890 Patents, and we have been transparent about these risks throughout the briefing process.
Defendant's Resources and Counsel. Lumos Photonics, Inc. is a well-capitalized public company with FY 2022 revenue of $312.8 million and a market capitalization of approximately $1.87 billion at the time of suit filing. Lumos's financial resources support an aggressive defense, and the company has demonstrated its willingness to invest heavily in this litigation. Additionally, BHS lead partner Victoria Ashworth is recognized as one of the most aggressive and effective patent litigators in the Northern District of California, and her involvement has elevated the quality and intensity of the defense throughout the claim construction phase.
Invalidity Risk. While we believe the asserted claims are valid, Lumos's invalidity counterclaims add complexity and risk to the overall litigation. The Tanaka prior art reference (U.S. Patent No. 9,456,012) presents a particular concern for the '567 Patent, given that it was co-invented by a current OWS employee and was specifically addressed during prosecution of the '567 Patent.
discovery Risks. Lumos's deficient document production, if not cured, could delay the fact discovery process and necessitate motion practice that adds cost and timeline risk. Additionally, OWS must ensure that its own document production is complete and that all responsive documents have been produced, as any production failures could create adverse inference risks at trial.
Strategic Reassessment. We will conduct a comprehensive reassessment of case strategy upon receipt of the Markman Order. This reassessment will consider the viability of OWS's infringement theories, the strength of Lumos's invalidity defenses in light of the adopted constructions, the damages exposure, and the cost-benefit analysis of continued litigation versus settlement.
12. Conclusion and Recommendation
This matter is at a critical juncture. The Markman hearing on January 30, 2023 will define the path forward for OWS's patent infringement claims against Lumos Photonics. The claim construction briefing is complete, our hearing preparation is thorough, and our team is fully ready to present OWS's positions effectively before Judge Torvelis.
We recommend that OWS management and Vantage Point Capital Partners be prepared for all outcomes and defer any strategic decisions regarding settlement or continued prosecution until the Markman Order is received and thoroughly analyzed. The claim construction order will provide the clarity needed to make informed decisions about the value of the case, the appropriate settlement range (if any), and the resources required to take the case through expert discovery, dispositive motions, and trial.
Calderwood & Harkness remains committed to the vigorous prosecution of OWS's patent rights. We are confident in our preparation for the hearing and believe that OWS's claim construction positions are well-supported by the law and the intrinsic record. At the same time, we have endeavored throughout this report to provide a candid and realistic assessment of the risks, so that our clients can make fully informed strategic decisions in the weeks ahead.
We will provide an immediate update following the January 30, 2023 hearing, including any bench rulings or significant observations regarding the Court's questions and reactions during argument. Upon issuance of the Markman Order, we will prepare and deliver a comprehensive written post-*Markman* assessment with detailed strategic recommendations.
We appreciate the confidence that OWS and Vantage Point have placed in Calderwood & Harkness, and we welcome any questions or comments regarding this report.