UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS MARSHALL DIVISION
OPTIWAVE SEMICONDUCTOR CORP.,
Plaintiff,
v.
LUMICORE TECHNOLOGIES, INC.,
Defendant.
Case No. 2:24-cv-00319-JRG
Judge James R. Gilstrap
PLAINTIFF OPTIWAVE SEMICONDUCTOR CORP.'S MOTION TO EXCLUDE CERTAIN OPINIONS OF DEFENDANT'S DAMAGES EXPERT DR. NATASHA VOLKOV PURSUANT TO FEDERAL RULE OF EVIDENCE 702 AND *DAUBERT v. MERRELL DOW PHARMACEUTICALS, INC.*
Plaintiff Optiwave Semiconductor Corp. ("OWS" or "Plaintiff") respectfully moves this Court, pursuant to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), for an order excluding three discrete categories of opinions offered by Defendant Lumicore Technologies, Inc.'s ("Lumicore" or "Defendant") damages expert, Dr. Natasha Volkov, Partner, Pinnacle Analytics Partners LLP, 1000 Louisiana Street, Suite 3100, Houston, Texas 77002. Dr. Volkov's challenged opinions are set forth in her expert report served on July 15, 2025, the deadline for Defendant's rebuttal expert reports. In support of this Motion, OWS states as follows:
I. INTRODUCTION
Optiwave Semiconductor Corp. respectfully moves this Court to exclude three discrete categories of opinions offered by Lumicore Technologies, Inc.'s damages expert, Dr. Natasha Volkov, because those opinions fail to satisfy the reliability requirements of Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and its progeny. Dr. Volkov's report, served on July 15, 2025, purports to present a reasonable-royalty damages analysis responding to the opinions of OWS's damages expert, Dr. Lawrence Keating, Managing Director, Meridian Economic Consulting Group, LLC. However, in three critical respects, Dr. Volkov's methodology departs from the established analytical frameworks governing patent damages and produces opinions that are unreliable, unsupported by the evidentiary record, and likely to mislead the jury.
First, Dr. Volkov employs an artificially disaggregated royalty base that strips out the value of the patented features from the accused transceiver modules. Rather than applying her proposed royalty rate to the smallest salable patent-practicing unit — the completed transceiver module, which is the only unit Lumicore sells to its customers — Dr. Volkov constructs a fictional "photonic engine" sub-assembly that is never separately sold, separately invoiced, or separately priced by Lumicore. This approach is contrary to the well-established smallest-salable-patent-practicing-unit ("SSPPU") framework and the entire-market-value rule ("EMVR") as articulated by the Federal Circuit in LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012), and VirnetX, Inc. v. Sterling Reach Holdings, 767 F.3d 1308 (Fed. Cir. 2014). Dr. Volkov's disaggregation is a methodological artifice designed to minimize Lumicore's damages exposure, not a principled economic analysis.
Second, Dr. Volkov fails to conduct a complete Georgia-Pacific analysis in deriving her proposed royalty rate. Of the fifteen factors set forth in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), Dr. Volkov addresses only seven, dismissing the remaining eight factors as "not relevant" or "indeterminate" without adequate justification. Among the factors she ignores are several that are plainly relevant to this case — including Factor 2 (rates paid for comparable licenses of the patent in suit), Factor 5 (the commercial relationship between licensor and licensee), Factor 8 (the established profitability and commercial success of the patented invention), and Factor 13 (the portion of realizable profit attributable to the patented invention). An expert who selectively addresses only those Georgia-Pacific factors that favor her client's position while ignoring factors that cut against it has not applied a reliable methodology — she has engaged in outcome-driven advocacy masquerading as economic analysis.
Third, Dr. Volkov relies on three facially non-comparable license agreements as her primary royalty-rate benchmarks. Two of these licenses involve MEMS accelerometer patents, and the third involves RF filter patents for wireless handsets. None of the three involves silicon-photonics technology, optical transceivers, waveguide multiplexing, data-center interconnect products, or any technology remotely comparable to the patents at issue in this case. Dr. Volkov made no attempt to adjust the rates from these licenses to account for the vast differences in technology, market dynamics, competitive landscape, and negotiating context. Meanwhile, she dismissed five readily available licenses involving OWS's own silicon-photonics patents and closely analogous technology — licenses that Dr. Keating identified and analyzed in his report — as "not adequately comparable," without performing a full comparability analysis. The Federal Circuit has repeatedly held that reliance on non-comparable licenses to establish a royalty rate renders a damages opinion unreliable and subject to exclusion. See Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1327–28 (Fed. Cir. 2009); ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 872–73 (Fed. Cir. 2010).
This case involves four asserted patents — U.S. Patent Nos. 10,234,847 (the "'847 Patent"), 10,891,193 (the "'193 Patent"), 9,678,562 (the "'562 Patent"), and 11,402,015 (the "'015 Patent") — covering waveguide multiplexing, coherent optical transceiver integration, thermal management of photonic integrated circuits, and polarization-diverse grating coupler technologies for silicon-photonics transceiver modules. These patents represent core innovations in the silicon-photonics field and are practiced across Lumicore's three accused product lines: the LumiLink 400G-ZR+, the LumiLink 800G-DR8, and the LumiEdge 1600G-LR. The accused products generated $264.9 million in revenue in FY 2023 alone, with projected revenue through trial of approximately $714.6 million.
OWS's damages expert, Dr. Lawrence Keating, presents three well-supported damages theories in his June 15, 2025 expert report: (1) lost profits under the Panduit framework of approximately $128.9 million; (2) a reasonable royalty under the Georgia-Pacific framework of approximately $37.5 million, applying an 8.5% royalty rate to non-lost-profit sales; and (3) enhanced damages for willful infringement. Dr. Keating's aggregate damages demand is approximately $210.0 million. His opinions are grounded in a full fifteen-factor Georgia-Pacific analysis, a rigorous SSPPU determination, and a detailed comparability analysis of five arm's-length licenses involving silicon-photonics patents in the relevant market.
If Dr. Volkov's challenged opinions are admitted, the jury will be presented with a damages framework that appears to carry the weight of expert economic analysis but is in fact methodologically deficient in multiple, independent respects. Each of the three challenged categories of opinions fails the reliability threshold of Rule 702 and Daubert, and this Court should exercise its gatekeeping function to exclude them.
II. LEGAL STANDARD
A. Federal Rule of Evidence 702
Federal Rule of Evidence 702, as amended effective December 1, 2023, provides:
A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if the proponent demonstrates to the court that it is more likely than not that:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and
(d) the expert's opinion reflects a reliable application of the principles and methods to the facts of the case.
Fed. R. Evid. 702. The 2023 amendment emphasized the preponderance-of-the-evidence standard for the proponent's burden, clarifying that courts should not permit expert testimony to reach the jury merely because the evidence is "sufficient" in some lesser sense. See Fed. R. Evid. 702 advisory committee's note to 2023 amendment ("The amendment clarifies that the preponderance standard applies to the three reliability-based requirements added in 2000 — i.e., Requirements (b), (c), and (d).").
The Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), established the trial court's role as "gatekeeper" for expert testimony, requiring the court to ensure that all expert testimony is both relevant and reliable before it is presented to the jury. Id. at 589, 597. In Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999), the Supreme Court confirmed that the trial court's gatekeeping obligation applies to all expert testimony, not just scientific testimony, including the testimony of economic and financial experts. Id. at 147–49.
The proponent of expert testimony bears the burden of establishing admissibility by a preponderance of the evidence. See Fed. R. Evid. 702(b)–(d); Moore v. Ashland Chem. Inc., 151 F.3d 269, 276 (5th Cir. 1998) (en banc). Where the proponent cannot meet this burden, the testimony must be excluded regardless of the expert's credentials or experience. See Daubert, 509 U.S. at 595.
B. Daubert Reliability Factors
In evaluating reliability, the Daubert Court identified a non-exhaustive list of factors for the trial court's consideration:
(1) whether the expert's theory or technique can be and has been tested;
(2) whether it has been subjected to peer review and publication;
(3) the known or potential rate of error;
(4) the existence and maintenance of standards controlling the technique's operation; and
(5) whether the theory or technique has been generally accepted in the relevant scientific or technical community.
Daubert, 509 U.S. at 593–94. These factors are neither exclusive nor dispositive; the inquiry is a "flexible one," and the court may consider other factors relevant to the reliability of the proffered expert opinion in the particular case. Kumho Tire, 526 U.S. at 150; see also Pipitone v. Biomatrix, Inc., 288 F.3d 239, 244 (5th Cir. 2002) ("[T]he factors identified in Daubert may or may not be pertinent in assessing reliability, depending on the nature of the issue, the expert's particular expertise, and the subject of his testimony." (internal quotation marks omitted)).
In patent damages cases, the Federal Circuit has imposed additional, rigorous requirements for economic expert testimony that serve as a critical overlay to the general Daubert framework. These requirements include faithful application of the fifteen-factor analysis set forth in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970); proper identification of the SSPPU; and rigorous application of the EMVR. See, e.g., Uniloc USA, Inc. v. Kestrel Partners LLC, 632 F.3d 1292, 1315 (Fed. Cir. 2011) (excluding damages testimony based on the "25 percent rule of thumb" as fundamentally flawed and lacking economic basis); LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67–68 (Fed. Cir. 2012) (holding that the entire-market-value rule requires that the patented feature drive demand for the entire product before total product revenues may serve as the royalty base); VirnetX, Inc. v. Sterling Reach Holdings, 767 F.3d 1308, 1326–28 (Fed. Cir. 2014) (vacating damages award where expert relied on non-comparable license agreements and failed to adequately apportion between patented and unpatented features). The Federal Circuit has emphasized that "a reasonable royalty analysis requires a court to hypothesize, not to speculate." Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 31 (Fed. Cir. 2012).
C. Exclusion of Unreliable Damages Opinions in Patent Cases
Courts in this District and the Federal Circuit routinely exclude damages expert opinions that fail to properly apportion value between patented and unpatented features, rely on non-comparable license agreements as royalty benchmarks, or cherry-pick Georgia-Pacific factors to arrive at a predetermined result. See, e.g., Uniloc, 632 F.3d at 1315–18; LaserDynamics, 694 F.3d at 67–70; VirnetX, 767 F.3d at 1326–34; Summit 6, LLC v. Northgate & Co. Elecs. Co., 802 F.3d 1283, 1296–98 (Fed. Cir. 2015); Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d 1299, 1311–13 (Fed. Cir. 2018); Elbit Sys. of Am., LLC v. Thales Visionix, Inc., 881 F.3d 1354, 1358–60 (Fed. Cir. 2018). As the Federal Circuit has explained, "[w]e have cautioned that district courts must not let the lure of a 'battle of the experts' sideline the court's crucial role in evaluating the reliability of each expert's methodology." Summit 6, 802 F.3d at 1296.
Importantly, partial exclusion is appropriate where discrete opinions are unreliable but other portions of an expert's testimony may satisfy Rule 702. See, e.g., Micro Chem., Inc. v. Lextron, Inc., 317 F.3d 1387, 1392 (Fed. Cir. 2003); i4i Ltd. P'ship v. Kestrel Partners LLC, 598 F.3d 831, 856 (Fed. Cir. 2010). The Court may excise the unreliable portions of an expert's opinions while permitting the expert to offer testimony on matters where her methodology is sound. OWS seeks precisely such targeted relief here.
III. FACTUAL BACKGROUND
A. The Parties and the Asserted Patents
Optiwave Semiconductor Corp. OWS is a Delaware corporation headquartered at 4810 Bayside Technology Parkway, Suite 300, Santa Clara, California 95054. OWS is a fabless semiconductor company specializing in the design and commercialization of silicon-photonics chipsets for data-center interconnects. In Fiscal Year 2023, OWS reported revenue of $487.3 million and net income of $61.4 million. The company employs approximately 1,250 people, including more than 400 engineers in its silicon-photonics design group. OWS is the third-largest U.S. supplier of silicon-photonics transceiver modules for hyperscale data centers, behind only two large, vertically integrated competitors. OWS holds 142 issued U.S. patents and has 58 additional patent applications pending. Its principal transceiver-module product families are the OWS-400ZR, OWS-800XR, and OWS-1600DR, which compete directly with Lumicore's accused product lines. OWS's majority owner is Ridgeline Capital Partners, LP, which acquired a 55% equity stake in 2019 for approximately $780 million. The OWS Board of Directors is chaired by Franklin Osei.
Lumicore Technologies, Inc. Lumicore is a Delaware corporation headquartered at 9200 Spectrum Boulevard, Building C, Austin, Texas 78759. Lumicore is a fast-growing entrant in the silicon-photonics transceiver market. In Fiscal Year 2023, Lumicore reported revenue of approximately $312.6 million. Lumicore completed an initial public offering on the Nasdaq Stock Market in March 2022 at $24.00 per share. At the time OWS filed its complaint on April 22, 2024, Lumicore's share price was approximately $37.00, representing a market capitalization of approximately $3.4 billion based on approximately 91.8 million shares outstanding. Lumicore's rapid revenue growth since its IPO has been fueled in substantial part by the commercial success of the three accused product lines at issue in this case.
The Asserted Patents. OWS asserts four United States patents in this action, each covering core innovations in silicon-photonics transceiver technology:
(a) The '847 Patent (U.S. Patent No. 10,234,847), titled "Multi-Channel Silicon Photonic Waveguide Multiplexer with Low Insertion Loss." Filed September 14, 2016; issued March 19, 2019. Originally assigned to OWS. This patent covers an innovative waveguide multiplexer architecture that achieves industry-leading low insertion loss across multiple optical channels, enabling high-bandwidth data transmission in dense wavelength-division multiplexing configurations.
(b) The '193 Patent (U.S. Patent No. 10,891,193), titled "High-Bandwidth Coherent Optical Transceiver Integrated on Silicon Substrate." Filed April 7, 2017; issued January 12, 2021. Originally assigned to OWS. This patent covers the integration of coherent optical transceiver functionality on a single silicon substrate, eliminating the need for discrete optical components and enabling significant reductions in module size, power consumption, and manufacturing cost.
(c) The '562 Patent (U.S. Patent No. 9,678,562), titled "Method for Thermal Management of Photonic Integrated Circuits Using Embedded Micro-Channel Heat Sinks." Filed November 22, 2014; issued June 13, 2017. Originally assigned to Solara Optics, Inc. OWS acquired all right, title, and interest in the '562 Patent (along with other assets) from Solara Optics pursuant to an asset purchase agreement dated June 15, 2018, for a total consideration of $34.5 million. This patent covers a novel thermal management approach that uses micro-channel heat sinks embedded within the photonic integrated circuit substrate to dissipate heat generated by high-power optical components, thereby preventing thermal degradation and enabling sustained high-bandwidth operation.
(d) The '015 Patent (U.S. Patent No. 11,402,015), titled "Polarization-Diverse Grating Coupler for Silicon Photonic Transceivers." Filed August 30, 2019; issued August 2, 2022. Originally assigned to OWS. This patent covers a polarization-diverse grating coupler design that efficiently couples light from optical fibers into the silicon-photonic waveguide layer, regardless of the polarization state of the incoming light, eliminating polarization-dependent loss that has historically limited transceiver performance.
The '193 Patent and the '015 Patent share Provisional Application No. 62/499,117, filed April 7, 2017. The '562 Patent and the '847 Patent are in the same patent family through a continuation relationship. Together, these four patents cover complementary aspects of the complete silicon-photonics transceiver signal chain — from fiber-to-chip coupling (the '015 Patent), through waveguide multiplexing (the '847 Patent) and coherent optical transceiver integration (the '193 Patent), to thermal management (the '562 Patent). As OWS's technical expert, Dr. Caroline Ashford of the Northfield Institute of Technology, opines in her June 15, 2025 report, these four technologies operate in concert to enable the high-bandwidth, low-power, and thermally stable transceiver-module performance that hyperscale data-center customers demand. (Ex. C, Ashford Report at 14–28.)
B. The Accused Products and Revenue
Lumicore's three accused product lines and their associated revenue figures are as follows:
The total accused-product revenue over the infringement period (Q3 2022 through Q1 2024) is approximately $378.2 million. Dr. Keating's preliminary analysis projects total accused-product revenue through the anticipated trial date (Q3 2022 through Q4 2025) of approximately $714.6 million. (Ex. B, Keating Report at 42–47.)
Product-level gross margins for the accused products, produced by Lumicore in discovery under the "Highly Confidential — Attorneys' Eyes Only" designation of the parties' Stipulated Protective Order (D.E. 30), range from 52.1% for the LumiLink 400G-ZR+ to 58.3% for the LumiEdge 1600G-LR, reflecting the premium pricing and strong profitability of products in this market segment. (Ex. E, Lumicore Sales Data at LUMI-DAM-000142–000198.)
Lumicore sells each of its accused products as completed transceiver modules to its customers, including Pinnacle Data Systems, LLC (Longview, Texas), Frontier Cloud Services, Inc. (Marshall, Texas), and CrossPoint Networking Corp. (Plano, Texas). These customers — hyperscale data-center operators and networking infrastructure companies — purchase the modules as fully integrated, ready-to-deploy units. Lumicore does not offer for sale, and its customers do not purchase, any disaggregated sub-assembly of the transceiver module, including the "photonic engine" sub-assembly that Dr. Volkov has constructed for purposes of her damages analysis. (Ex. E, Lumicore Sales Data; Ex. G, Michaud Dep. Tr. at 87:14–88:22.)
C. OWS's Damages Case (Dr. Keating's Opinions)
OWS's damages expert, Dr. Lawrence Keating, Managing Director of Meridian Economic Consulting Group, LLC, served his expert report on June 15, 2025. Dr. Keating presents three independent damages theories:
Theory 1 — Lost Profits (*Panduit*). Dr. Keating applies the four-factor test for lost-profit damages established in Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978), and adopted by the Federal Circuit. He calculates lost profits by applying OWS's market-share displacement rate of 38.2% to the projected accused-product revenue of $714.6 million, and then applying OWS's gross margin of 47.3% on its competing products. This yields lost-profit damages of approximately $128.9 million. Dr. Keating demonstrates that OWS satisfies each Panduit factor: (1) demand for the patented products, (2) absence of acceptable non-infringing substitutes, (3) manufacturing and marketing capability, and (4) the amount of profit OWS would have made. (Ex. B, Keating Report at 48–72.)
Theory 2 — Reasonable Royalty (*Georgia-Pacific*). For accused-product sales not captured by the lost-profits analysis, Dr. Keating applies a reasonable-royalty rate of 8.5% to non-lost-profit sales of $441.6 million, yielding reasonable-royalty damages of approximately $37.5 million. The 8.5% rate is derived from a comprehensive fifteen-factor Georgia-Pacific analysis and is corroborated by five comparable license agreements:
(a) OWS–Terralink Semiconductor License Agreement (2020): 6.5% running royalty rate;
(b) OWS–NovaWave Corp. License Agreement (2021): 9.0% running royalty rate;
(c) OWS–Helix Integrated Photonics License Agreement (2022): 7.75% running royalty rate plus $2.5 million upfront payment;
(d) Stratos Photonics v. ArcLight Systems Settlement License (2019): 8.0% running royalty rate; and
(e) Coreline Technologies v. Prisma Semiconductor Cross-License Agreement (2021): 10.2% imputed royalty rate.
Each of these licenses involves silicon-photonics patents, covers similar product categories, and was negotiated in the same general timeframe as the hypothetical negotiation date established by Dr. Keating — Q2 2022, immediately prior to the launch of Lumicore's first accused product. Dr. Keating's royalty-rate benchmarking analysis, presented in Appendix C to his report, identifies an industry-wide range of 4.0% to 12.5% for silicon-photonics patent licenses, further supporting the reasonableness of his proposed 8.5% rate. (Ex. B, Keating Report at 73–118 & App. C.)
Theory 3 — Enhanced Damages for Willful Infringement. Dr. Keating calculates post-notice lost profits of approximately $109.2 million subject to the enhanced-damages multiplier under 35 U.S.C. § 284. (Ex. B, Keating Report at 119–128.)
In the aggregate, Dr. Keating's damages opinions support OWS's demand of approximately $210.0 million in total damages.
D. Dr. Volkov's Expert Report (Summary of Challenged Opinions)
Dr. Natasha Volkov is a Partner at Pinnacle Analytics Partners LLP, located at 1000 Louisiana Street, Suite 3100, Houston, Texas 77002. She was retained by Lumicore through its litigation counsel, Hawthorne Vega & Cruz LLP, under the direction of lead partner Catherine "Kate" Rourke. Dr. Volkov served her rebuttal expert report on July 15, 2025, the deadline for Defendant's rebuttal expert reports.
Dr. Volkov's report spans 147 pages (plus appendices) and addresses various aspects of OWS's damages case. OWS challenges three discrete categories of Dr. Volkov's opinions:
Opinion Category 1 — Disaggregated Royalty Base. Dr. Volkov breaks the accused transceiver modules into sub-components and applies her proposed royalty rate only to an isolated "photonic engine" sub-assembly — a purported component that is not separately sold, separately priced, or separately purchased by Lumicore's customers. Dr. Volkov identifies this sub-assembly as comprising the silicon-photonics chip, the grating coupler array, the waveguide multiplexer structures, and the embedded micro-channel heat sinks, but excluding the module housing, electrical interconnects, fiber-optic connectors, DSP (digital signal processing) chip, driver circuitry, trans-impedance amplifiers, and other components. This disaggregation results in a dramatically reduced royalty base — according to Dr. Volkov, the "photonic engine" represents only approximately 28% of the module-level selling price — and correspondingly depresses the total damages figure. (Ex. A, Volkov Report at 62–78.)
Opinion Category 2 — Incomplete *Georgia-Pacific* Analysis. Dr. Volkov's report addresses only 7 of the 15 Georgia-Pacific factors, dismissing the remaining 8 as "not relevant" or "indeterminate" without adequate justification. Among the factors she omits or dismisses are Factor 2 (rates paid for comparable licenses), Factor 5 (commercial relationship between licensor and licensee), Factor 8 (commercial success and profitability of the patented invention), Factor 9 (advantages of the patented invention over prior art), Factor 10 (nature of the patented invention), Factor 11 (extent of the infringer's use), Factor 12 (customary profit or selling price), and Factor 13 (portion of realizable profit attributable to the invention). Each of these factors is plainly relevant to the hypothetical negotiation in this case. (Ex. A, Volkov Report at 79–104.)
Opinion Category 3 — Non-Comparable Licenses. Dr. Volkov relies on three license agreements as her primary royalty-rate benchmarks, none of which involves silicon-photonics technology, optical transceivers, waveguide multiplexing, or data-center interconnect products. Two of the three licenses involve MEMS accelerometer patents, and the third involves RF filter patents for wireless handsets. Dr. Volkov acknowledges the existence of OWS's five identified comparable licenses but dismisses them as "not adequately comparable" without performing a detailed comparability analysis. (Ex. A, Volkov Report at 105–122.)
IV. ARGUMENT
A. Dr. Volkov's Artificially Disaggregated Royalty Base Should Be Excluded
Dr. Volkov's decision to apply her proposed royalty rate to an artificially constructed "photonic engine" sub-assembly, rather than to the smallest salable patent-practicing unit — the completed transceiver module — is methodologically unsound, unsupported by the evidentiary record, and contrary to controlling Federal Circuit authority. This opinion should be excluded under Rule 702 and Daubert.
1. The SSPPU Doctrine Requires Use of the Smallest Salable Unit That Practices the Patented Invention. The Federal Circuit has made clear that, where a patent covers a component of a multi-component product, the royalty base should ordinarily be the smallest salable patent-practicing unit rather than the entire product. LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012); VirnetX, Inc. v. Sterling Reach Holdings, 767 F.3d 1308, 1326 (Fed. Cir. 2014). The purpose of the SSPPU doctrine is to ensure that the royalty base is closely tied to the patented technology and does not sweep in revenue attributable to unpatented features. VirnetX, 767 F.3d at 1327. The doctrine, however, establishes a floor, not a ceiling. An expert may not disaggregate the product below the smallest salable unit to fabricate an even smaller base that artificially excludes value attributable to the patented features.
In this case, the smallest salable patent-practicing unit for each of the three accused product lines is the completed transceiver module — the LumiLink 400G-ZR+, the LumiLink 800G-DR8, and the LumiEdge 1600G-LR. These are the smallest units that Lumicore sells to its customers. They are the units that practice the asserted patents. They are the units for which Lumicore quotes prices, issues invoices, and records revenue. Lumicore's own product documentation, sales records, and pricing data — produced in discovery and designated Highly Confidential — Attorneys' Eyes Only — uniformly confirm that Lumicore sells only completed transceiver modules. (Ex. E, Lumicore Sales Data at LUMI-DAM-000142–000198.) Lumicore does not sell, and its customers do not purchase, any disaggregated sub-assembly of the transceiver module. There is no separate SKU, no separate price list entry, and no separate sales channel for a "photonic engine" sub-assembly. (Ex. E; Ex. G, Michaud Dep. Tr. at 87:14–88:22 (Lumicore CTO Dr. Sandra Michaud testifying that the "photonic engine" is "not a product we sell" and "not something our customers can order").)
The SSPPU doctrine exists to prevent the inflation of a royalty base by including revenue from unpatented features in a larger product. It does not authorize the opposite manipulation — the deflation of a royalty base by disaggregating the smallest salable unit into sub-components that are never separately sold. Dr. Volkov's approach turns the SSPPU doctrine on its head.
2. Dr. Volkov's Disaggregation Lacks Evidentiary Support and Reliable Methodology. Dr. Volkov's "photonic engine" sub-assembly is not a recognized product unit, cost center, or accounting category in Lumicore's systems. It is a construct of Dr. Volkov's own making, developed solely for purposes of this litigation. The evidentiary deficiencies underlying this construct are numerous and fatal to its reliability.
No Lumicore cost-accounting data supports the disaggregation. Dr. Volkov did not rely on any cost-accounting data from Lumicore that tracks the "photonic engine" as a separate cost center or assigns it a separate internal transfer price. Lumicore's manufacturing cost records, produced in discovery, do not disaggregate costs at the level of the "photonic engine" sub-assembly. (Ex. H, Volkov Dep. Tr. at 142:7–143:19 (Dr. Volkov acknowledging that she "did not receive from Lumicore a cost breakdown at the photonic engine level" and that she "derived the cost allocation based on [her] own analysis of the bill of materials").) Instead, Dr. Volkov performed her own allocation using what she describes as a "component-level cost attribution methodology" that she has not published, that has not been peer-reviewed, and that she has not applied in any prior engagement. (Ex. A, Volkov Report at 68–72; Ex. H, Volkov Dep. Tr. at 147:3–148:11.)
The disaggregation ignores the integrated nature of the patented technology. Dr. Volkov's approach artificially isolates one physical sub-component of the transceiver module while ignoring the fundamental reality that the patented features — the waveguide multiplexer, the thermal management micro-channels, the coherent transceiver integration, and the polarization-diverse grating coupler — are what enable the entire module to function as designed and sold. The patented technologies do not operate in isolation within the "photonic engine"; they enable the module-level performance characteristics — bandwidth, power efficiency, thermal stability, and signal integrity — that drive customer demand for the complete product. As OWS's technical expert, Dr. Caroline Ashford, explains in her report:
"The patented technologies at issue are not discrete features that can be isolated from the rest of the transceiver module. They are foundational to the module's architecture. Without the low-insertion-loss waveguide multiplexer of the '847 Patent, the module cannot achieve its specified channel count or bandwidth. Without the coherent transceiver integration of the '193 Patent, the module cannot achieve its specified data rate at the required form factor. Without the embedded micro-channel heat sinks of the '562 Patent, the module cannot sustain operation at its rated power levels without thermal degradation. And without the polarization-diverse grating coupler of the '015 Patent, the module experiences unacceptable polarization-dependent loss. These technologies operate together to define the module's commercial performance envelope."
(Ex. C, Ashford Report at 31–32.)
Customer demand is driven by the patented features at the module level. OWS's industry expert, Gregory Falk — a former Vice President of Engineering at Solara Optics, Inc., with more than 25 years of experience in the silicon-photonics and optical networking industry — will testify that hyperscale data-center operators select transceiver modules based primarily on optical performance parameters that are directly attributable to the patented innovations at issue. Mr. Falk's report identifies the key customer purchasing criteria — including insertion loss, channel count, data rate, power consumption, and thermal performance — and explains that each of these criteria is driven by one or more of the patented technologies. (Ex. D, Falk Report at 18–34.) This evidence supports the use of the module-level price as the royalty base, because the patented features are the basis for customer demand for the accused modules.
Dr. Keating's damages analysis properly uses the module-level selling price as the royalty base, consistent with the SSPPU doctrine and the EMVR, because the transceiver module is the smallest salable unit that practices the asserted patents and because the patented features drive customer demand for the module as a whole. (Ex. B, Keating Report at 35–41.) Dr. Volkov's disaggregation, by contrast, rests on no evidentiary foundation and no accepted economic methodology.
3. The Resulting Royalty Is Untethered to Economic Reality. The practical effect of Dr. Volkov's disaggregation is dramatic. By defining the "photonic engine" as representing only approximately 28% of the module-level selling price, Dr. Volkov reduces the royalty base from the full projected accused-product revenue of $714.6 million to approximately $200.1 million — before even applying her proposed royalty rate. (Ex. A, Volkov Report at 75–78.) The resulting royalty figure would fail to reasonably compensate OWS for Lumicore's unauthorized use of four foundational patents covering the core technologies of the accused products.
The Federal Circuit has repeatedly held that an expert's royalty base must have a "legally and factually sufficient" connection to the patented technology's contribution to the accused product. Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014). A royalty base that is artificially deflated through methodologically unsound disaggregation fails this requirement. See Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., 809 F.3d 1295, 1302–03 (Fed. Cir. 2015) (recognizing that "the essential requirement is that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product").
Dr. Volkov's disaggregation produces a result that is untethered to the economic reality of how the accused products are sold, how customers value the patented features, and how the silicon-photonics transceiver market operates. It should be excluded.
B. Dr. Volkov's Failure to Conduct a Full Georgia-Pacific Analysis Renders Her Royalty-Rate Opinion Unreliable
1. Georgia-Pacific Requires Consideration of All Relevant Factors. The Georgia-Pacific framework sets forth fifteen factors that an expert should consider in conducting a hypothetical-negotiation analysis to determine a reasonable royalty. Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). Those fifteen factors are:
1. The royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty.
2. The rates paid by the licensee for the use of other patents comparable to the patent in suit.
3. The nature and scope of the license, as exclusive or non-exclusive, or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold.
4. The licensor's established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly.
5. The commercial relationship between the licensor and licensee, such as whether they are competitors in the same territory in the same line of business, or whether they are inventor and promoter.
6. The effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales.
7. The duration of the patent and the term of the license.
8. The established profitability of the product made under the patent; its commercial success; and its current popularity.
9. The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.
10. The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.
11. The extent to which the infringer has made use of the invention and any evidence probative of the value of that use.
12. The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.
13. The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.
14. The opinion testimony of qualified experts.
15. The amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement.
While courts recognize that not every Georgia-Pacific factor will be relevant in every case, damages experts are expected to address all applicable factors and to provide a reasoned and supported explanation for why any particular factor does not apply or is indeterminate. See WhitServe, LLC v. Computer Packages, Inc., 694 F.3d 10, 31 (Fed. Cir. 2012); ActiveVideo Networks, Inc. v. Harborview Holdingsmmc'ns, Inc., 694 F.3d 1312, 1333 (Fed. Cir. 2012). An expert who simply ignores factors that cut against her opinion, or who dismisses them with conclusory labels, has not applied a reliable methodology. See Wordtech Sys., Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308, 1319–20 (Fed. Cir. 2010).
2. Dr. Volkov Omitted or Dismissed at Least Eight Factors Without Adequate Justification. Dr. Volkov's report addresses only Factors 1, 3, 4, 6, 7, 14, and 15 of the Georgia-Pacific framework. She dismisses the remaining eight factors — Factors 2, 5, 8, 9, 10, 11, 12, and 13 — as either "not relevant to the hypothetical negotiation in this case" or "indeterminate based on the available evidence." (Ex. A, Volkov Report at 79–104.) Each of these omitted factors is, in fact, plainly relevant to this case, and Dr. Volkov's failure to address them renders her royalty-rate opinion unreliable.
Factor 2 — Rates Paid by the Licensee for Comparable Patents. This factor is directly relevant because OWS has identified five license agreements involving its own silicon-photonics patents and closely analogous technology. Dr. Keating analyzed each of these licenses in detail, establishing their comparability in terms of technology, market, and negotiating context, and deriving a range of 6.5% to 10.2% (with a broader industry range of 4.0% to 12.5%). (Ex. B, Keating Report at 78–100 & App. C.) Dr. Volkov dismissed all five of these licenses as "not adequately comparable" in a single paragraph of her report, without performing the detailed comparability analysis that the Federal Circuit requires. (Ex. A, Volkov Report at 86–87.) At the same time, she substituted three licenses from entirely unrelated technology fields — MEMS accelerometers and RF filters — as her own benchmarks. This is not a reasoned exercise of expert judgment; it is the wholesale dismissal of the most probative available evidence.
Factor 5 — Commercial Relationship Between Licensor and Licensee. OWS and Lumicore are direct competitors in the silicon-photonics transceiver market. They sell competing product lines — OWS's OWS-400ZR, OWS-800XR, and OWS-1600DR families versus Lumicore's LumiLink 400G-ZR+, LumiLink 800G-DR8, and LumiEdge 1600G-LR families — to many of the same hyperscale data-center customers. This direct competitive relationship is highly relevant to the hypothetical negotiation, as it would tend to increase the royalty rate a willing licensor would demand (because licensing a direct competitor creates lost sales) and would inform the structure of any negotiated license (e.g., field-of-use restrictions, territorial limitations). Dr. Volkov does not analyze this factor at all. (Ex. A, Volkov Report at 91 (stating only that Factor 5 is "indeterminate as to effect on the hypothetical negotiation").)
Factor 8 — Established Profitability, Commercial Success, and Current Popularity of the Patented Invention. The commercial success of the patented technologies is well-documented in the record. OWS's FY 2023 revenue of $487.3 million includes approximately $310 million from products that practice the asserted patents. Lumicore's accused products — which also practice the asserted patents — generated $264.9 million in FY 2023 revenue and earn gross margins of 52.1% to 58.3%. These figures reflect the substantial commercial value of the patented innovations. Yet Dr. Volkov's report does not discuss these figures or analyze Factor 8 in any meaningful way. (Ex. A, Volkov Report at 93 (dismissing Factor 8 as "not independently determinative").)
Factor 9 — Advantages of the Patented Invention Over Prior-Art Alternatives. OWS's technical expert, Dr. Caroline Ashford of the Northfield Institute of Technology, provides detailed opinions on the superior performance characteristics of the patented technologies over prior-art approaches, including quantified improvements in insertion loss (approximately 40% reduction with the '847 Patent's waveguide multiplexer), thermal performance (approximately 25°C reduction in peak junction temperature with the '562 Patent's micro-channel heat sinks), and polarization-dependent loss (approximately 0.3 dB improvement with the '015 Patent's grating coupler). (Ex. C, Ashford Report at 35–52.) Dr. Volkov does not address these advantages or their effect on the hypothetical negotiation.
Factor 10 — Nature of the Patented Invention and Its Commercial Embodiment. The nature of the patented inventions — core architectural innovations in silicon-photonics transceiver technology, embodied in products generating hundreds of millions of dollars in annual revenue — is directly relevant to the royalty that would have been negotiated. Dr. Volkov does not analyze this factor. (Ex. A, Volkov Report at 95.)
Factor 11 — Extent to Which the Infringer Has Used the Invention and Evidence of Its Value. Lumicore practices the asserted patents across all three of its accused product lines, which collectively represent approximately 84.7% of Lumicore's FY 2023 revenue. This extensive use is probative of the value of the patented technology to Lumicore and would bear directly on the hypothetical negotiation. Dr. Volkov does not address this factor. (Ex. A, Volkov Report at 96.)
Factor 12 — Customary Profit or Selling Price. Lumicore's gross margins on the accused products range from 52.1% to 58.3%, indicating that there is substantial profit available to support a meaningful royalty payment. Dr. Keating analyzes this factor in detail, explaining how the available profit margin informs the range of royalty rates that both parties would find acceptable in the hypothetical negotiation. (Ex. B, Keating Report at 107–110.) Dr. Volkov dismisses Factor 12 as "not independently determinative of the royalty rate" without analyzing the margin data. (Ex. A, Volkov Report at 98.)
Factor 13 — Portion of Realizable Profit Attributable to the Patented Invention. Factor 13 is perhaps the most critical factor in a case involving the SSPPU/EMVR issues at the heart of this motion, because it requires the expert to assess the portion of the accused product's profit attributable to the patented technology as distinguished from non-patented elements. Dr. Volkov's failure to address Factor 13 is particularly troubling because it is the factor most directly relevant to her own disaggregated royalty-base approach. If Dr. Volkov had properly analyzed Factor 13, she would have been required to assess the contribution of the patented features to the overall value of the accused transceiver modules — an analysis that would have undermined her artificial "photonic engine" disaggregation. (Ex. A, Volkov Report at 99 (dismissing Factor 13 as "addressed through the royalty base apportionment").) This circular reasoning — claiming that Factor 13 is addressed by the very disaggregation that OWS challenges — does not constitute the independent, reasoned analysis required by the Georgia-Pacific framework.
3. Cherry-Picking Favorable Factors Is Methodologically Unreliable. The seven factors that Dr. Volkov does address are, predictably, the factors that favor a lower royalty rate. Factor 1 (established royalty) — she finds no established royalty, which she argues weighs against OWS. Factor 3 (nature and scope of the license) — she argues a broad, non-exclusive license would command a lower rate. Factor 4 (licensor's policy) — she argues OWS's history of licensing weighs against an exclusionary premium. Factor 6 (convoyed sales) — she finds no significant convoyed sales, reducing the royalty. Factor 7 (duration) — she argues the remaining patent terms are limited, reducing the royalty. Factor 14 (expert opinion) — she relies on her own opinion. Factor 15 (what the parties would have agreed) — she presents her own bottom-line conclusion.
The pattern is unmistakable: Dr. Volkov addresses the factors that support Lumicore's position while systematically omitting or dismissing the factors that would support a higher royalty rate — the same factors that Dr. Keating's comprehensive analysis identifies as pointing to a rate in the 8.5% range. This is outcome-driven analysis, not economic analysis. As the Federal Circuit has recognized, an expert who addresses only those Georgia-Pacific factors favorable to her party's position while ignoring unfavorable ones has not applied a reliable methodology. See Whitserve, 694 F.3d at 31–32; ActiveVideo, 694 F.3d at 1333.
Courts have excluded damages opinions where the expert engaged in precisely this type of selective analysis. See, e.g., i4i Ltd. P'ship v. Kestrel Partners LLC, 598 F.3d 831, 854 (Fed. Cir. 2010) (holding that "simply plugging in" values to a formula without "conducting a sufficiently thorough analysis of the applicable factors" renders the opinion unreliable); Elbit Sys. of Am., 881 F.3d at 1360 (emphasizing the need for "an adequate evidentiary basis for every step" of the hypothetical-negotiation analysis). Dr. Volkov's incomplete Georgia-Pacific analysis predictably produces a below-market royalty rate that does not reflect the outcome of the hypothetical negotiation as of Q2 2022, and it should be excluded.
C. Dr. Volkov's Reliance on Non-Comparable License Agreements Should Be Excluded
1. The Federal Circuit Requires Comparability of License Benchmarks. The use of comparable license agreements as benchmarks is a central component of the Georgia-Pacific reasonable-royalty analysis. However, the Federal Circuit has imposed rigorous comparability requirements to ensure that the licenses an expert relies upon are probative of the hypothetical negotiation at issue — rather than serving as arbitrary starting points that have no meaningful connection to the patented technology or the parties' circumstances.
In Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1327–28 (Fed. Cir. 2009), the Federal Circuit vacated a damages award where the expert relied on licenses that "do not even mention, much less value, the patented method" and bore "little relation to the hypothetical license at issue." In ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 872–73 (Fed. Cir. 2010), the Federal Circuit held that the district court erred in relying on licenses that included "several agreements with no relationship to the claimed invention" and emphasized that "the most reliable license in this record arose out of litigation" involving the actual patent at issue. And in VirnetX, 767 F.3d at 1330, the Federal Circuit reaffirmed that "comparable license agreements" must be "sufficiently comparable to the hypothetical license at issue in suit."
To satisfy the comparability requirement, a damages expert must demonstrate that the licenses she relies upon are comparable in terms of: (a) the technology licensed; (b) the economic circumstances, including market size, product pricing, and competitive dynamics; (c) the scope of the license, including exclusivity, territory, and field of use; and (d) the negotiating context, including whether the license arose from arm's-length negotiation, litigation settlement, or other circumstances. See VirnetX, 767 F.3d at 1330–31; Lucent, 580 F.3d at 1325–27. Where the expert relies on licenses that fail to meet these comparability requirements, her royalty-rate opinion lacks the evidentiary foundation necessary for reliability under Rule 702 and Daubert.
2. Dr. Volkov's Three Primary License Benchmarks Are Facially Non-Comparable. Dr. Volkov relies on three license agreements as her primary benchmarks for deriving a reasonable-royalty rate. None of these licenses involves silicon-photonics technology, optical transceivers, waveguide multiplexing, data-center interconnect products, or any technology that is comparable to the asserted patents.
License 1 — MEMS Accelerometer License (Kestrel microsystems–Summit Inertial, 2018, 2.8% running royalty). This license covers a portfolio of patents related to MEMS (microelectromechanical systems) accelerometer technology used in automotive and industrial applications. MEMS accelerometers are inertial sensors used to detect acceleration and orientation — they have no technological relationship to silicon-photonics transceivers used for data-center optical interconnects. The MEMS accelerometer market is characterized by high volumes, low unit prices (typically $0.50–$5.00 per unit), and thin margins — fundamentally different from the silicon-photonics transceiver market, where module prices typically range from $500 to $5,000 and gross margins are 50%–60%. Dr. Volkov provides no analysis of why a royalty rate negotiated for MEMS accelerometer technology would inform a silicon-photonics transceiver royalty. (Ex. A, Volkov Report at 108–111.)
License 2 — MEMS Accelerometer License (Axiom Dynamics–TrueNorth Sensors, 2019, 3.1% running royalty). This license suffers from the same fundamental deficiency as License 1. It involves a different licensor and licensee, covers a different MEMS accelerometer patent portfolio, and relates to a different set of end-use applications (consumer electronics and wearable devices). There is no connection to the parties in this case, the technology at issue, or the data-center interconnect market. Dr. Volkov again provides no analysis of comparability beyond noting that both licenses involve "semiconductor-related patents" — a description so broad as to encompass virtually any patent in the electronics industry. (Ex. A, Volkov Report at 112–115.)
License 3 — RF Filter License (Meridian RF Solutions–GlobalComm Technologies, 2020, 3.5% running royalty). This license covers patents related to RF (radio frequency) filter technology used in wireless handset applications. While RF filters are semiconductor devices and thus closer to the broad semiconductor technology category than MEMS accelerometers, they serve a fundamentally different end-market than silicon-photonics transceivers. RF filters for wireless handsets are high-volume, low-complexity components used to isolate frequency bands in cellular communication systems. Silicon-photonics transceivers are high-value, high-complexity modules used for optical data transmission in data-center environments. The two markets differ in every material respect — customer base, competitive dynamics, gross margins, product complexity, and technology trajectory. (Ex. A, Volkov Report at 116–120.)
In sum, none of Dr. Volkov's three license benchmarks involves silicon-photonics technology, optical transceivers, waveguide multiplexing, coherent optical transceiver integration, thermal management of photonic integrated circuits, polarization-diverse grating coupler technology, or data-center interconnect products. None involves parties that are direct competitors in the same market, as OWS and Lumicore are. And Dr. Volkov made no effort to adjust the rates from these licenses to account for the significant differences in technology, market conditions, patent scope, and negotiating circumstances between the benchmark licenses and the hypothetical license at issue. The Federal Circuit has made clear that reliance on such facially non-comparable licenses renders a damages opinion unreliable and subject to exclusion. See ResQNet, 594 F.3d at 872; Lucent, 580 F.3d at 1327–28.
3. Dr. Volkov Ignored Readily Available Comparable Licenses. The unreliability of Dr. Volkov's license-benchmarking analysis is compounded by her decision to ignore five readily available and facially comparable licenses that were identified by OWS and analyzed in detail by Dr. Keating. These five licenses are:
(1) OWS–Terralink Semiconductor License Agreement (2020): 6.5% running royalty rate on silicon-photonics transceiver products practicing a subset of OWS's patent portfolio, including patents in the same family as the '847 and '562 Patents.
(2) OWS–NovaWave Corp. License Agreement (2021): 9.0% running royalty rate on optical transceiver products, covering patents including the '193 Patent and related continuation applications.
(3) OWS–Helix Integrated Photonics License Agreement (2022): 7.75% running royalty rate plus a $2.5 million upfront payment, covering a portfolio of silicon-photonics patents including the '015 Patent.
(4) Stratos Photonics v. ArcLight Systems Settlement License (2019): 8.0% running royalty rate, arising from patent litigation involving silicon-photonics waveguide multiplexer patents closely analogous to the '847 Patent.
(5) Coreline Technologies v. Prisma Semiconductor Cross-License Agreement (2021): 10.2% imputed royalty rate (calculated by Dr. Keating based on the relative values of the cross-licensed portfolios), covering silicon-photonics patents related to coherent optical transceiver and grating coupler technologies.
Each of these licenses involves silicon-photonics patents. Each covers product categories similar to the accused products. Each was negotiated during the same general timeframe as the hypothetical negotiation date of Q2 2022. And the first three involve OWS itself as a party, making them among the most probative possible benchmarks for the hypothetical negotiation in this case. See Monsanto Co. v. McFarling, 488 F.3d 973, 978–79 (Fed. Cir. 2007) (licenses involving the patent-in-suit or the patentee are the most reliable benchmarks).
Dr. Volkov acknowledged awareness of all five licenses in her report. She dismissed them in a single paragraph as "not adequately comparable to the hypothetical negotiation in this case" because, in her view, they "involve different patent portfolios, different licensees, and different market conditions." (Ex. A, Volkov Report at 86–87.) This conclusory dismissal does not constitute the detailed comparability analysis that the Federal Circuit requires. See VirnetX, 767 F.3d at 1330; Lucent, 580 F.3d at 1325–27. Dr. Volkov did not analyze the specific patents covered by each license, the specific products covered, the market conditions at the time of negotiation, or the negotiating context. She did not explain why differences between these licenses and the hypothetical license at issue render them non-comparable, while the far greater differences between the MEMS accelerometer and RF filter licenses and the hypothetical license do not. This selective exclusion of the most probative evidence, while relying on facially dissimilar agreements, is the hallmark of unreliable expert methodology.
Dr. Keating's royalty-rate benchmarking analysis, presented in Appendix C to his report, identifies an industry-wide range of 4.0% to 12.5% for running royalties in silicon-photonics patent licenses. (Ex. B, Keating Report, App. C.) This range is derived from an analysis of 17 license agreements involving silicon-photonics technology, optical transceiver patents, and related intellectual property, negotiated between 2016 and 2024. The five comparable licenses identified above fall within this range, as does Dr. Keating's proposed 8.5% rate. By contrast, the rates from Dr. Volkov's three non-comparable benchmarks — 2.8%, 3.1%, and 3.5% — all fall below the bottom of the range observed in the relevant silicon-photonics market, further demonstrating that her benchmarks do not reflect the economics of the technology and market at issue.
Dr. Volkov's reliance on non-comparable license agreements to derive her proposed royalty rate fails the Federal Circuit's comparability requirement and should be excluded.
V. THE COURT SHOULD EXERCISE ITS GATEKEEPING FUNCTION TO EXCLUDE THESE OPINIONS
In summary, OWS challenges three discrete categories of Dr. Volkov's opinions, each of which independently fails the reliability requirements of Rule 702 and Daubert:
First, Dr. Volkov's artificially disaggregated royalty base — based on a fictional "photonic engine" sub-assembly that is not separately sold, separately priced, or recognized as a product unit in Lumicore's systems — is methodologically unsound, unsupported by the evidentiary record, and contrary to the SSPPU doctrine established by the Federal Circuit.
Second, Dr. Volkov's incomplete Georgia-Pacific analysis — addressing only 7 of 15 factors while dismissing 8 plainly relevant factors as "not relevant" or "indeterminate" — produces an outcome-driven opinion rather than a principled economic analysis of the hypothetical negotiation.
Third, Dr. Volkov's reliance on three non-comparable license agreements from unrelated technology fields — MEMS accelerometers and RF filters — as her primary royalty-rate benchmarks, while dismissing five readily available silicon-photonics licenses, fails the Federal Circuit's comparability requirement and would mislead the jury as to the appropriate royalty rate.
These opinions, individually and collectively, do not meet the threshold of reliability required by Federal Rule of Evidence 702 and Daubert. Each reflects a failure to apply reliable principles and methods to the facts of this case. Each produces an opinion that is untethered to the evidentiary record and to the established economic frameworks governing patent damages. And each, if admitted, would confuse and mislead the jury by presenting a damages framework that appears to carry the imprimatur of expert economic analysis but is in fact methodologically deficient.
The Court's gatekeeping obligation under Daubert requires exclusion of these opinions. As the Supreme Court explained, the objective of the gatekeeping requirement is to "ensur[e] that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Daubert, 509 U.S. at 597. Expert