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Confidentiality Notice
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
Prepared by Calderwood & Harkness LLP for the Board of Directors of Optiwave Semiconductor Corp. and Ridgeline Capital Partners, LP
Case No. 2:24-cv-00319-JRG (E.D. Tex.) — Judge James R. Gilstrap
March 2025 — Not for distribution beyond authorized recipients
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Agenda
Case Overview & Current Posture
Asserted Patents & Accused Products
Damages Theory 1: Lost Profits (Panduit Analysis)
Damages Theory 2: Reasonable Royalty (Georgia-Pacific Analysis)
Damages Theory 3: Enhanced Damages for Willful Infringement
Aggregate Damages Summary & Recovery Scenarios
Injunctive Relief — Strategic Value
Litigation Budget & Fee Update
Risk Assessment & Settlement Positioning
Key Upcoming Milestones & Next Steps
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Case Overview
Plaintiff: Optiwave Semiconductor Corp. (OWS) — $487.3M FY 2023 revenue; 142 issued U.S. patents; 3rd-largest U.S. supplier of silicon-photonics transceiver modules for hyperscale data centers
Defendant: Lumicore Technologies, Inc. (LTC) — ~$312.6M FY 2023 revenue; ~$3.4B market cap (Nasdaq-listed); fast-growing competitor in silicon-photonics transceivers
Filed April 22, 2024 in E.D. Tex. — 7 counts across 4 U.S. utility patents
Counsel: Calderwood & Harkness LLP (lead); Whitmore & Callahan LLP (local counsel, Tyler, TX)
Defense Counsel: Hawthorne Vega & Cruz LLP (lead partner: Kate Rourke); Trask Eddington LLP (local counsel)
Damages demand: approximately $210 million
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Current Case Posture
Infringement Contentions served September 16, 2024; Invalidity Contentions served October 14, 2024
Claim construction briefs fully briefed — 14 disputed terms (12 remain in dispute after 2 agreed)
Joint Claim Construction Chart (final) filed January 15, 2025
Markman hearing: March 14, 2025 (imminent)
Fact discovery closes: May 1, 2025
Plaintiff expert reports due: June 15, 2025
Dispositive motions due: September 15, 2025; Daubert motions due: November 1, 2025
Jury trial: February 2, 2026 (estimated 7–10 days)
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The Asserted Patents
U.S. 10,234,847 ('847 Patent) — 'Multi-Channel Silicon Photonic Waveguide Multiplexer with Low Insertion Loss' — Filed Sept. 14, 2016; Issued Mar. 19, 2019
U.S. 10,891,193 ('193 Patent) — 'High-Bandwidth Coherent Optical Transceiver Integrated on Silicon Substrate' — Filed Apr. 7, 2017; Issued Jan. 12, 2021
U.S. 9,678,562 ('562 Patent) — 'Method for Thermal Management of PICs Using Embedded Micro-Channel Heat Sinks' — Filed Nov. 22, 2014; Issued June 13, 2017 — Acquired from Solara Optics via APA (June 2018, $34.5M portfolio)
U.S. 11,402,015 ('015 Patent) — 'Polarization-Diverse Grating Coupler for Silicon Photonic Transceivers' — Filed Aug. 30, 2019; Issued Aug. 2, 2022
'562 and '847 are in the same family (continuation relationship); '193 and '015 share common Provisional App. No. 62/499,117
All maintenance fees current; no IPR petitions filed to date
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Accused Products & Revenue Base
LumiLink 400G-ZR+ — Launched Q3 2022 — FY 2023 Revenue: $94.8M — Accused of infringing '847, '193, '562
LumiLink 800G-DR8 — Launched Q1 2023 — FY 2023 Revenue: $128.4M — Accused of infringing '847, '193, '562, '015
LumiEdge 1600G-LR — Launched Q4 2023 — FY 2023 Revenue: $41.7M — Accused of infringing '193, '015
Total Accused Product Revenue (FY 2023): $264.9M
Total Accused Product Revenue (infringement period, Q3 2022 – Q1 2024): ~$378.2M
Projected Accused Product Revenue through trial (Q3 2022 – Q4 2025): ~$714.6M
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Damages Theory 1: Lost Profits — Panduit Analysis
Framework: Panduit Corp. v. Stahlin Bros. four-factor test
Factor 1 — Demand: OWS FY 2023 revenue of $487.3M demonstrates strong market demand for patented products (OWS-400ZR, OWS-800XR, OWS-1600DR)
Factor 2 — Absence of Non-Infringing Substitutes: 4 potential alternatives analyzed; each lacks key patented features (waveguide multiplexer, micro-channel heat sinks, grating coupler)
Factor 3 — Manufacturing & Marketing Capability: OWS has foundry capacity and established sales channels to serve displaced demand
Factor 4 — Profit Amount: OWS gross margin on competing products = 47.3%
Market-Share Displacement: 38.2% (head-to-head competition at 12 of top 20 hyperscale data-center operators)
Lost Profits Calculation: $714.6M × 38.2% × 47.3% ≈ $128.9M
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Damages Theory 2: Reasonable Royalty — Georgia-Pacific Analysis
Framework: Georgia-Pacific Corp. v. United States Plywood Corp. — 15-factor analysis
Applicable to Lumicore sales OWS could not have captured (non-overlapping customers / geographies)
Hypothetical negotiation date: Q2 2022 (pre-launch of LumiLink 400G-ZR+)
Royalty base (non-lost-profit sales): $714.6M – ($714.6M × 38.2%) = ~$441.6M
Proposed royalty rate: 8.5% of net sales — supported by 5 comparable licenses (range: 4.0%–12.5%)
Reasonable Royalty Calculation: $441.6M × 8.5% ≈ $37.5M
EMVR applies: patented features (waveguide multiplexer, thermal management, grating coupler) drive demand for entire transceiver module
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Damages Theory 3: Enhanced Damages — Willful Infringement
Legal Standard: Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93 (2016) — subjective willfulness; Read factors for enhancement
Pre-suit notice: FairPoint Licensing Group letter dated January 15, 2023 (identified '847, '193, '562 Patents)
Supplemental notice: FairPoint letter dated May 15, 2023 (added '015 Patent and LumiLink 800G-DR8)
In-person meeting: April 20, 2023 in Austin — Lumicore showed 'no interest in negotiating' (Angela Reeves testimony)
Post-notice product launch: LumiEdge 1600G-LR launched Q4 2023 — after full awareness of OWS patents
Lumicore CTO Dr. Michaud admitted reviewing OWS published patent application during LumiLink design; could not identify non-infringing alternatives
Lumicore engineer Melissa Chen: design team accessed OWS published patent application during 2021–2022 design phase
Post-notice lost profits: ~$109.2M; enhancement sought yields additional ~$43.6M (blended into $210M demand)
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Aggregate Damages Summary
Lost Profits (Panduit): ~$128.9M
Reasonable Royalty (Georgia-Pacific, 8.5%): ~$37.5M
Subtotal (without enhancement): ~$166.4M
Enhanced Damages (willful, blended component): ~$43.6M (as pled in complaint)
Total Damages Demand (as pled): ~$210.0M
Note: $210M reflects a blended, rounded demand — not a simple arithmetic sum of individual theory maxima
Dr. Keating's expert report will present multiple scenarios with ranges
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Recovery Scenarios
Best Case: $210M–$285M — Prevail on all patents, all products, full willfulness finding with trebling on post-notice component; permanent injunction granted
Expected Case: ~$138M — Weighted probability: 75% likelihood of prevailing on liability × 85% surviving invalidity defenses × damages range; reflects decision-tree analysis
Conservative Case: ~$145M — Prevail on infringement and validity but limited or no willfulness enhancement; royalty rate reduced to lower end of range
Settlement Recommendation: Minimum acceptable $125M cash + royalty-bearing license; or $100M cash + permanent injunction / product withdrawal
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Injunctive Relief — Strategic Value
Cascade Holdings four-factor test: irreparable harm, inadequacy of legal remedies, balance of hardships, public interest
OWS competes directly with Lumicore — practicing entity status strongly supports injunction
Price erosion: 18.7% ASP decline in 400G-ZR transceivers (Q3 2022 – Q4 2023) linked to Lumicore's market entry
7 major hyperscale customers purchase from both OWS and Lumicore — direct competitive overlap
If injunction granted: ~42% of Lumicore's product revenue at risk
Lumicore's estimated redesign timeline: 18–24 months — significant competitive disruption
Draft proposed injunction includes 18-month sunset provision for existing customer commitments
Injunction is primary settlement leverage — may drive resolution before trial
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Litigation Budget & Fee Update
Board-approved litigation budget: $18.5M through trial (OWS Board Resolution No. 2024-07; approved April 2, 2024)
Cumulative C&H fees through January 2025: $3,201,600
Cumulative costs through January 2025: $198,400 — Total billed: $3,400,000 (18.4% of budget consumed)
Remaining budget: $15,100,000
Blended cap rate: $925/hr (negotiated with Ridgeline Capital Partners)
Expert fee budget: ~$2.8M total (Dr. Ashford $1.1M; Dr. Keating $950K; Gregory Falk $375K; Benchmark $375K)
Success fee component: 5% of net recovery above $150M
Insurance: Pacific Rim Insurance Group Policy No. PLI-2023-08812 — notice provided April 24, 2024
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Key Risks & Mitigation
Claim Construction Risk: Narrow constructions of key terms could limit infringement findings — Markman hearing March 14, 2025
Invalidity Risk: 23 prior-art references; strongest challenges are Takahashi (anticipation of '847) and Lumicore prior-conception defense on '015 — mitigated by Dr. Ashford's rebuttal opinions
Doctrine of Equivalents Risk: Prosecution-history estoppel on '193 Claims 3/7 and '015 Claim 12 — Festo tangential-relation exception argued
IPR Risk: Statutory deadline for Lumicore to file IPR is May 1, 2025 — contingency opposition to stay is drafted
Daubert Risk: Anticipated challenges to Dr. Keating's EMVR and market-share displacement methodology — pre-emptive Daubert motions prepared against defense experts
Inequitable Conduct Counterclaim: Allegation re: Dr. Huang's prosecution of '193 Patent — assessed as weak (reference was cumulative; no specific intent to deceive)
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Settlement Positioning
Decision-tree expected value of trial outcome: ~$138M
Recommended minimum settlement: $125M cash + prospective royalty-bearing license on accused and next-generation products
Alternative minimum: $100M cash + permanent injunction or confirmed product withdrawal
Settlement leverage increases significantly after favorable Markman ruling (March 14, 2025) and after IPR deadline passes (May 1, 2025)
Potential mediation: three mediators identified — Ret. Judge Harold K. Devereaux (JAMS), Patricia Nolan-Ferris (ADR Services International), Carl Weingarten (Judicial Arbitration Associates)
Any settlement requires OWS Board and Ridgeline Capital approval per governance requirements
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Key Upcoming Milestones
March 14, 2025 — Markman Hearing (claim construction ruling expected shortly after)
May 1, 2025 — Fact discovery Close / IPR Filing Deadline (35 U.S.C. § 315(b))
June 15, 2025 — Plaintiff Expert Reports Due (Dr. Ashford, Dr. Keating, Gregory Falk)
July 15, 2025 — Defendant Rebuttal Expert Reports Due
August 15, 2025 — Expert discovery Close (expert depositions July–August 2025)
September 15, 2025 — Dispositive Motions Due (partial SJ planned on '562 infringement and '015 validity)
November 1, 2025 — Daubert Motions Due
January 5, 2026 — Pre-Trial Conference
February 2, 2026 — Jury Trial (7–10 days, E.D. Tex.)
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Recommended Board Actions
Affirm continuation of litigation through Markman hearing and expert-report phases
Authorize litigation team to finalize and file expert reports by June 15, 2025 deadline
Approve updated damages scenarios for settlement authority parameters
Direct management to preserve and supplement document holds as discovery expands
Schedule follow-up Board briefing for post-Markman analysis (target: April 2025)
Consider mediation timing — optimal window is post-Markman, post-IPR deadline (May–June 2025)