EXPERT RETENTION AGREEMENT
Damages Expert Services
August 5, 2024
THIS EXPERT RETENTION AGREEMENT (this "Agreement") is entered into as of August 5, 2024 (the "Effective Date"), by and between:
CALDERWOOD & HARKNESS LLP ("Firm" or "C&H"), a California limited liability partnership, with its principal office located at 350 South Grand Avenue, 48th Floor, Los Angeles, California 90071, acting on behalf of its client, Optiwave Semiconductor Corp., a Delaware corporation ("OWS" or "Client");
and
DR. LAWRENCE KEATING ("Expert"), Managing Director of Meridian Economic Consulting Group, LLC ("Meridian"), an Illinois limited liability company, with offices located at 233 South Wacker Drive, Suite 4400, Chicago, Illinois 60606.
C&H and Expert are each referred to herein as a "Party" and collectively as the "Parties."
Matter Reference:
Optiwave Semiconductor Corp. v. Lumicore Technologies, Inc., Case No. 2:24-cv-00319-JRG, United States District Court for the Eastern District of Texas, marshall Division, before the Honorable Judge James R. Gilstrap (the "Action").
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RECITALS
WHEREAS:
A. The Litigation. OWS has filed a patent infringement action against Lumicore Technologies, Inc. ("Lumicore"), a Delaware corporation headquartered at 9200 Spectrum Boulevard, Building C, Austin, Texas 78759, in the United States District Court for the Eastern District of Texas, marshall Division, docketed as Case No. 2:24-cv-00319-JRG and assigned to the Honorable Judge James R. Gilstrap. In the Action, OWS asserts infringement of four United States utility patents: U.S. Patent No. 10,234,847 (the "'847 Patent"), U.S. Patent No. 10,891,193 (the "'193 Patent"), U.S. Patent No. 9,678,562 (the "'562 Patent"), and U.S. Patent No. 11,402,015 (the "'015 Patent") (collectively, the "Asserted Patents"). The Asserted Patents cover optical transceiver and waveguide multiplexing technologies used in silicon photonics chipsets designed for high-speed data-center interconnect applications. The technologies protected by the Asserted Patents are critical to the design, manufacture, and performance of next-generation pluggable coherent optics modules and multi-wavelength transceivers deployed by hyperscale data-center operators worldwide.
B. Counsel of Record. C&H serves as lead litigation counsel for OWS in the Action, with Alan Ngo serving as Responsible Partner and Marcus Delgado serving as Billing Partner. Local counsel services in the Eastern District of Texas are provided by Whitmore & Callahan LLP, through James "Jim" Callahan, Esq., located in Tyler, Texas. Together, C&H and local counsel are managing all aspects of the litigation, including discovery, motion practice, claim construction proceedings, expert retention, and trial preparation.
C. Nature of Engagement. C&H desires to retain Dr. Keating as a testifying damages expert to provide opinions on the economic harm suffered by OWS as a result of Lumicore's alleged infringement of the Asserted Patents. The scope of Dr. Keating's engagement includes, but is not limited to, the preparation of lost profits analyses, reasonable royalty analyses, and enhanced damages analyses, as well as the preparation of written expert reports, provision of deposition testimony, and delivery of trial testimony, all in connection with the damages phase of the Action.
D. Expert's Qualifications. Dr. Keating is a nationally recognized expert in the field of intellectual property damages and economic analysis. He holds a Ph.D. in Economics and has extensive experience serving as a testifying damages expert in patent infringement litigation, with particular depth in matters involving semiconductor, photonics, fiber optics, and telecommunications technologies. Dr. Keating is the Managing Director of Meridian Economic Consulting Group, LLC, a premier economic consulting firm specializing in intellectual property valuation, antitrust economics, and complex commercial damages analysis. Dr. Keating has been qualified as an expert and has testified in more than sixty patent infringement cases in federal district courts and before the International Trade Commission.
E. Accused Products. The accused product lines at issue in the Action are: (i) the LumiLink 400G-ZR+ optical transceiver module (launched in the third quarter of 2022), (ii) the LumiLink 800G-DR8 optical transceiver module (launched in the first quarter of 2023), and (iii) the LumiEdge 1600G-LR optical transceiver module (launched in the fourth quarter of 2023) (collectively, the "Accused Products"). Based on information currently available, total Accused Product revenue for Lumicore's fiscal year 2023 was approximately $264.9 million. Projected total Accused Product revenue for the full infringement period through the anticipated trial date (covering the period from the third quarter of 2022 through the fourth quarter of 2025) is approximately $714.6 million.
F. Damages Demand. OWS seeks total damages of approximately $210 million in the Action, comprising lost profits attributable to market-share displacement by the Accused Products, reasonable royalties on sales for which lost profits are not recoverable, and enhanced damages for willful infringement under 35 U.S.C. § 284. The damages demand reflects OWS's preliminary assessment of its economic harm, which Dr. Keating's analysis is intended to refine, support, and present in a manner consistent with applicable legal standards and economic principles.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
SECTION 1 — SCOPE OF ENGAGEMENT
1.1 General Scope
C&H hereby retains Dr. Keating, through Meridian, to serve as a testifying damages expert on behalf of OWS in the Action. Expert shall provide economic and financial analysis, prepare comprehensive written expert reports, and provide oral testimony at deposition and at trial, all as more specifically described in this Section 1. Expert's engagement encompasses the full range of damages-related expert services necessary to quantify the economic harm suffered by OWS as a result of Lumicore's alleged infringement of the Asserted Patents and to present those opinions in a manner that is clear, persuasive, and consistent with the requirements of the Federal Rules of Civil Procedure, the Federal Rules of Evidence, and applicable precedent regarding the admissibility of expert testimony.
1.2 Specific Assignments
Expert's engagement shall include, but not be limited to, the following specific assignments:
(a) Lost Profits Analysis (Panduit). Expert shall conduct a comprehensive lost profits analysis applying the four-factor test established in Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978), to quantify the profits OWS lost as a direct result of Lumicore's alleged infringement. This analysis shall include the following components:
(i) Demand for the Patented Products. Expert shall analyze the demand for OWS's patented optical transceiver products, including the OWS-400ZR and OWS-800XR product lines. OWS's fiscal year 2023 total revenue was approximately $487.3 million, a significant portion of which was generated by products incorporating the technologies covered by the Asserted Patents. Expert shall assess the overall market demand for 400G, 800G, and 1600G optical transceivers for data-center interconnect applications and the extent to which that demand would have been satisfied by OWS's products absent Lumicore's infringement.
(ii) Absence of Acceptable Non-Infringing Substitutes. Expert shall analyze the relevant market to determine whether acceptable non-infringing substitute products were available during the infringement period. This analysis shall consider the specific features and performance characteristics of the Accused Products attributable to the patented technology, including wavelength-division multiplexing density, signal-to-noise ratios, and power consumption characteristics, and whether competing products not practicing the Asserted Patents could have served as adequate substitutes from the perspective of data-center customers.
(iii) OWS's Manufacturing and Marketing Capability. Expert shall assess OWS's capacity to manufacture and market sufficient quantities of its competing products to satisfy the demand that was diverted to the Accused Products. This assessment shall include analysis of OWS's existing manufacturing capacity, supply chain arrangements, and sales and distribution infrastructure during the relevant period.
(iv) Amount of Profit OWS Would Have Made. Expert shall calculate the profits OWS would have earned on the incremental sales it would have made but for Lumicore's infringement. OWS's gross margin on its competing products (OWS-400ZR and OWS-800XR) was approximately 47.3% during the relevant period. Expert shall prepare a detailed financial model incorporating a market-share displacement analysis. Based on preliminary assessment, the displacement factor is estimated at approximately 38.2%, reflecting OWS's competitive position relative to other market participants. The preliminary lost profits estimate is approximately $128.9 million, calculated as projected Accused Product revenue of $714.6 million multiplied by the 38.2% displacement factor multiplied by OWS's 47.3% gross margin. Expert shall refine this preliminary estimate as additional data becomes available through discovery.
(b) Reasonable Royalty Analysis (Georgia-Pacific). Expert shall conduct a comprehensive analysis applying the fifteen-factor framework established in Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), to determine a reasonable royalty rate applicable to Accused Product sales for which lost profits are not recoverable. This analysis shall include:
(i) Hypothetical Negotiation. Expert shall construct a hypothetical negotiation between OWS (as licensor) and Lumicore (as licensee), with the hypothetical negotiation date set as the second quarter of 2022, immediately prior to the launch of the first Accused Product (the LumiLink 400G-ZR+). Expert shall analyze the economic circumstances, bargaining positions, and market conditions that would have informed a willing licensor and willing licensee at the time of the hypothetical negotiation.
(ii) Comparable License Agreements. Expert shall identify and analyze comparable license agreements, including at least three OWS license agreements: (A) the OWS-Terralink Semiconductor license, (B) the OWS-NovaWave Corp. license, and (C) the OWS-Helix Integrated Photonics license. Expert shall also analyze at least two industry-comparable licensing transactions for benchmarking purposes, including the Stratos Photonics v. ArcLight Systems settlement license and the Coreline Technologies v. Prisma Semiconductor license agreement. Expert shall assess the comparability of each license to the hypothetical negotiation at issue, taking into account the scope of the licensed technology, the nature of the licensed products, the structure of the royalty (running royalty, lump sum, or hybrid), and the competitive relationship between the parties.
(iii) Royalty Rate. Based on the Georgia-Pacific factor analysis, Expert shall support a reasonable royalty rate of 8.5% of Accused Product net sales. The preliminary reasonable royalty estimate on non-lost-profit sales is approximately $37.5 million. Expert shall present a detailed, factor-by-factor analysis justifying this rate, with supporting economic data, financial models, and comparable transaction analysis.
(c) Enhanced / Willful Infringement Damages. Expert shall analyze the appropriateness and quantum of enhanced damages under 35 U.S.C. § 284 in light of OWS's claim that Lumicore's infringement was willful. This analysis shall include:
(i) Read Factor Analysis. Expert shall apply the factors set forth in Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992), to assess the egregiousness of Lumicore's conduct and the appropriate level of enhancement, if any.
(ii) Post-Notice Period. Expert shall focus particular attention on Lumicore's conduct during the post-notice period, beginning on January 15, 2023, the date on which FairPoint Licensing Group, LLC sent its first licensing letter to Lumicore notifying Lumicore of the Asserted Patents and OWS's licensing program. Post-notice lost profits are estimated at approximately $109.2 million.
(iii) Enhancement Multiplier Scenarios. Expert shall model various enhancement multiplier scenarios, including multipliers of 1.5×, 2×, and 3× applied to the base damages figure (or such portion thereof as the Court may determine to be subject to enhancement), and shall provide analysis supporting the application of an appropriate multiplier in light of the factual record.
(d) Apportionment and Royalty Base Analysis. Expert shall address the legal and economic principles governing apportionment of damages in patent cases, including:
(i) Smallest Salable Patent-Practicing Unit (SSPPU). Expert shall analyze the smallest salable patent-practicing unit for each of the Accused Products and determine whether the SSPPU is the appropriate royalty base for the reasonable royalty calculation.
(ii) Entire Market Value Rule (EMVR). Expert shall prepare an analysis supporting the application of the entire market value rule to module-level pricing of the Accused Products where the patented features drive customer demand. This analysis shall include evidence that the patented optical transceiver and waveguide multiplexing technologies are the primary basis upon which data-center customers make purchasing decisions with respect to the Accused Products, such that the entire value of the transceiver module is properly attributable to the patented innovations.
(iii) Expert shall be prepared to address any challenges raised by Lumicore or its damages expert regarding the propriety of the royalty base selected and the apportionment methodology employed.
(e) Price Erosion Analysis. Expert shall quantify the competitive price erosion attributable to Lumicore's entry into the relevant transceiver markets with the Accused Products. Preliminary data indicates an average selling price decline of approximately 18.7% for 400G-ZR transceivers from the third quarter of 2022 through the fourth quarter of 2023. Expert shall analyze the causal connection between Lumicore's market entry and the observed price decline, isolate the portion of the price decline attributable to infringement (as opposed to normal competitive dynamics or market maturation), and quantify the resulting additional damages to OWS from price erosion on its non-displaced sales.
(f) Rebuttal Analysis. Expert shall prepare rebuttal opinions responding to the damages opinions expected to be offered by Lumicore's retained damages expert, Dr. Natasha Volkov of Pinnacle Analytics Partners LLP, located in Houston, Texas. Based on C&H's assessment of Lumicore's likely defense strategy, anticipated rebuttal topics include, but are not limited to:
(i) Challenges to Dr. Volkov's anticipated apportionment methodology, including any attempt to apportion damages below the module level or to attribute a disproportionate share of value to non-patented components;
(ii) Rebuttal of any alternative royalty-rate analysis offered by Dr. Volkov, including scrutiny of her proposed comparable license agreements and her application of the Georgia-Pacific factors;
(iii) Critique of Dr. Volkov's anticipated reliance on non-comparable licenses or licenses involving materially different technologies, product markets, or economic circumstances;
(iv) Any additional rebuttal topics that arise upon review of Dr. Volkov's opening expert report, once produced.
1.3 Deliverables. Expert shall prepare and deliver the following work product in connection with this engagement:
(a) Opening Expert Report. Expert shall prepare a comprehensive written expert report fully compliant with the requirements of Federal Rule of Civil Procedure 26(a)(2)(B). The Opening Expert Report shall be due on June 15, 2025, in accordance with the Scheduling Order entered in the Action (Docket Entry No. 27, issued August 12, 2024). The Opening Expert Report shall set forth all of Expert's damages opinions, the bases and reasons for each opinion, and the methodologies employed. The report shall be accompanied by supporting appendices, including:
(i) A Lost Profits Model, consisting of a detailed Excel-based financial model quantifying OWS's lost profits under the Panduit framework, including all underlying assumptions, data inputs, and sensitivity analyses;
(ii) A Georgia-Pacific Factor Analysis, setting forth Expert's detailed analysis of each of the fifteen Georgia-Pacific factors as applied to the hypothetical negotiation between OWS and Lumicore;
(iii) A Royalty Rate Benchmarking Analysis, presenting Expert's analysis of comparable license agreements and industry royalty rates supporting the proposed 8.5% royalty rate; and
(iv) Willful Infringement Enhancement Calculations, presenting the Read factor analysis and the various enhancement multiplier scenarios (1.5×, 2×, 3×) with supporting financial computations.
(b) Rebuttal Expert Report. Expert shall prepare a written rebuttal expert report responsive to the damages opinions offered by Dr. Volkov in Lumicore's opening damages expert report. The Rebuttal Expert Report shall be due on or before July 15, 2025, in accordance with the Scheduling Order (D.E. 27). The Rebuttal Expert Report shall comply with all applicable requirements of the Federal Rules of Civil Procedure and shall specifically address each material opinion offered by Dr. Volkov that Expert believes to be unreliable, unsupported, or incorrect.
(c) Deposition Testimony. Expert shall make himself available for deposition during the expert discovery period, which closes on August 15, 2025. Expert understands that Lumicore's counsel is expected to depose him and that the deposition may last up to seven hours, consistent with the default time limit under Federal Rule of Civil Procedure 30(d)(1), or such other duration as may be ordered by the Court. Expert shall cooperate with C&H in scheduling the deposition at a mutually convenient time and location.
(d) Trial Testimony. Expert shall provide live testimony at trial in the Action. Trial is currently scheduled to commence on February 2, 2026, in the Eastern District of Texas, marshall Division, Tyler, Texas. The estimated trial duration is seven to ten (7–10) court days. Expert shall reserve appropriate time on his calendar to accommodate the trial schedule, including preparation sessions with C&H in advance of trial. Expert's testimony is expected to encompass both direct examination and cross-examination on all damages-related opinions.
(e) Demonstrative Assistance. Expert shall collaborate with C&H and its trial presentation consultants in the preparation of trial demonstratives for the damages module of the case. Demonstratives are expected to include, but are not limited to: revenue growth timelines, lost-sales and market-share displacement analyses, royalty-rate benchmark charts, Georgia-Pacific factor summaries, price erosion illustrations, and enhanced-damages walkthroughs. Expert shall review and approve all demonstratives used in connection with his testimony to ensure accuracy and consistency with his opinions.
(f) Consultation. Expert shall provide ongoing consultation to the C&H litigation team, including Alan Ngo (Responsible Partner), Wendy Schultz (Senior Associate), and Omar Siddiqui (Associate), throughout the pendency of the engagement. Expert shall also consult and coordinate with other retained experts, specifically Dr. Caroline Ashford (technical/infringement expert, Northfield Institute of Technology) and Gregory Falk (industry expert, former Vice President of Engineering at Solara Optics, Inc.), on matters at the intersection of technical infringement opinions and damages quantification. Such consultation may include joint meetings, review of draft expert reports, and discussions regarding the relationship between technical claim limitations and the economic value attributable to the patented technology.
1.4 Coordination with Industry Expert
Expert shall coordinate closely with Gregory Falk regarding competitive landscape data, market-share dynamics, and the commercial significance of the patented innovations in the silicon-photonics transceiver market. Mr. Falk possesses extensive industry knowledge relevant to Expert's damages analysis, including information regarding customer overlap between OWS and Lumicore (twelve of the top twenty hyperscale data-center operators are customers of both companies), supply chain dynamics, product development cycles, and the competitive significance of the optical transceiver and waveguide multiplexing technologies covered by the Asserted Patents. Expert and Mr. Falk shall coordinate their analyses to ensure consistency and mutual support between the industry analysis and the damages quantification, while each maintaining independence in the formulation of his respective opinions.
SECTION 2 — COMPENSATION
2.1 Hourly Rate
Dr. Keating's hourly rate for all professional services rendered in connection with this engagement shall be Eight Hundred Seventy-Five Dollars ($875.00) per hour. This rate applies uniformly to all categories of professional activity, including but not limited to: analysis and report preparation, document and data review, consultation with C&H and co-retained experts, preparation for and attendance at depositions, preparation for and attendance at trial, and testimony at deposition and trial. There shall be no premium or surcharge for testimony time, travel time, or any other specific category of professional activity. Time shall be recorded and billed in increments of one-tenth (0.1) of an hour.
2.2 Support Staff Rates
Meridian professional staff assisting Dr. Keating in connection with this engagement shall be billed at the rates set forth in the rate schedule attached hereto as Exhibit A, which Meridian shall complete and provide to C&H for approval contemporaneously with the execution of this Agreement. C&H's prior written approval shall be required before any Meridian support staff member billing at a rate exceeding Five Hundred Dollars ($500.00) per hour is assigned to work on this engagement.
Paralegal and data-analysis support staff at Meridian shall be billed at rates not to exceed Two Hundred Fifty Dollars ($250.00) per hour without the prior written approval of C&H. All support staff assigned to this engagement shall be identified by name and title on each invoice, and their rates shall be consistent with the approved rate schedule.
2.3 Estimated Budget
The total estimated budget for Dr. Keating's engagement under this Agreement is Nine Hundred Fifty Thousand Dollars ($950,000) (the "Estimated Budget"). The approximate breakdown of the Estimated Budget is as follows:
The Estimated Budget is provided for planning purposes only and does not constitute a fee cap or ceiling on the total compensation payable under this Agreement. The actual fees and expenses may be higher or lower than the Estimated Budget depending on the scope and complexity of the work required, the volume of discovery materials to be reviewed, the extent of rebuttal analysis needed, and other factors that may not be fully foreseeable at the time of execution of this Agreement. However, any anticipated overruns exceeding ten percent (10%) of the Estimated Budget (i.e., overruns exceeding Ninety-Five Thousand Dollars ($95,000)) shall be communicated to C&H promptly upon identification, accompanied by a written explanation of the reasons for the anticipated overrun and a revised estimate for the remainder of the engagement.
C&H acknowledges that the total expert fee budget across all experts retained by C&H on behalf of OWS in the Action is approximately $2.8 million, as approved by OWS and Ridgeline Capital Partners, LP. The individual expert budgets are as follows: Dr. Caroline Ashford (technical/infringement expert): $1.1 million; Dr. Lawrence Keating (damages expert): $950,000; Gregory Falk (industry expert): $375,000; and Benchmark Semiconductor Analysis, LLC (reverse engineering/teardown analysis): $375,000.
2.4 Invoicing. Invoices for services rendered and expenses incurred under this Agreement shall be submitted monthly by Meridian to C&H, directed to the attention of Marcus Delgado, Billing Partner, at Calderwood & Harkness LLP, 350 South Grand Avenue, 48th Floor, Los Angeles, California 90071, or to such other address or electronic billing portal as C&H may designate from time to time.
Each invoice shall include the following information in sufficient detail to permit C&H to review and verify the charges:
(a) Detailed time entries for each timekeeper, including the date on which services were performed, the number of hours billed (in tenths of an hour), and a narrative description of the services rendered sufficient to identify the nature of the work performed;
(b) Itemized out-of-pocket expenses, with supporting documentation for any individual expense item exceeding Two Hundred Fifty Dollars ($250.00);
(c) The current period total for fees and expenses;
(d) The cumulative total of all fees and expenses billed to date under this Agreement; and
(e) The status of the retainer, including the amount remaining and any credits applied.
Payment Terms. Payment of conforming invoices shall be due within thirty (30) days of C&H's receipt thereof (i.e., Net 30). C&H shall notify Meridian in writing within fifteen (15) days of receipt of any invoice if C&H disputes any item on the invoice, and the Parties shall use good-faith efforts to resolve such disputes promptly. Undisputed portions of any invoice shall be paid in accordance with the standard payment terms notwithstanding any pending dispute regarding other items.
2.5 Expenses. Reasonable out-of-pocket expenses incurred by Expert or Meridian in connection with the engagement shall be reimbursed at cost, without markup. Reimbursable expenses include, but are not limited to:
(a) Travel expenses, including airfare (economy or coach class for domestic flights), ground transportation, hotel accommodations, and meals for appearances in Tyler, Texas, or other case-related travel required by C&H;
(b) Printing, copying, and binding costs associated with expert report preparation and production;
(c) Data processing costs, including costs associated with the analysis of large financial datasets, construction and operation of financial models, and data visualization;
(d) Research database access fees, including fees for access to economic and financial databases, industry reports, and academic literature; and
(e) Other reasonable expenses directly related to the engagement, as agreed upon by the Parties.
Travel expenses associated with Expert's trial testimony in Tyler, Texas (commencing February 2, 2026), and any appearance at the Markman hearing scheduled for March 14, 2025 (if Expert's attendance is required by C&H), are anticipated and included within the Estimated Budget set forth in Section 2.3.
No single expense item exceeding Five Thousand Dollars ($5,000) shall be incurred without the prior written approval of C&H. For purposes of this provision, "single expense item" refers to an individual expenditure, not to aggregated expenses within a category over time.
SECTION 3 — RETAINER
3.1 Initial Retainer
An initial retainer in the amount of Seventy-Five Thousand Dollars ($75,000) (the "Retainer") shall be paid by C&H, on behalf of OWS, to Meridian upon execution of this Agreement. Payment shall be made by wire transfer to the account designated by Meridian or by check delivered to Meridian's offices at 233 South Wacker Drive, Suite 4400, Chicago, Illinois 60606. The Retainer shall be applied against the final invoice or invoices submitted under this Agreement. Until so applied, the Retainer shall be held by Meridian in its client trust account in accordance with applicable professional responsibility rules and shall not be commingled with Meridian's operating funds. Interest, if any, earned on the Retainer while held in trust shall accrue to the benefit of C&H (on behalf of OWS).
3.2 Replenishment. If cumulative billed fees and expenses (net of the Retainer) exceed Five Hundred Thousand Dollars ($500,000) and the Retainer has been fully credited against outstanding invoices, C&H may, at its sole discretion, request that Expert accept an additional retainer in an amount not to exceed Fifty Thousand Dollars ($50,000) (the "Supplemental Retainer"). Any Supplemental Retainer shall be subject to the same terms and conditions as the initial Retainer set forth in Section 3.1, including the requirement that it be held in Meridian's client trust account and applied against the final invoice(s) under this Agreement.
SECTION 4 — CONFIDENTIALITY AND PROTECTIVE ORDER COMPLIANCE
4.1 Confidential Information
Expert acknowledges that in connection with this engagement he will have access to confidential, proprietary, and trade-secret information belonging to both OWS and Lumicore, as well as other third parties. Such information includes, but is not limited to:
(a) OWS internal financial data, including gross margins, product-line revenues, cost structures, pricing strategies, customer lists, and sales forecasts;
(b) Lumicore's product-level financial data produced in discovery, including gross margins on the Accused Products (which range from approximately 52.1% to 58.3% based on data produced to date), average selling prices, unit volumes, customer-by-customer revenue breakdowns, cost-of-goods-sold data, and internal financial projections;
(c) Terms and conditions of comparable license agreements, including the OWS-Terralink, OWS-NovaWave, and OWS-Helix licenses, as well as other third-party licensing transactions;
(d) Technical data, including product specifications, design documents, and reverse-engineering reports related to the Accused Products;
(e) Litigation strategy documents, attorney work product, and privileged communications shared with Expert in the course of the engagement; and
(f) Any other information designated as confidential under the Protective Order entered in the Action or otherwise identified as confidential by C&H.
Expert acknowledges the sensitive nature of this information and agrees to treat all such information with the highest degree of care and confidentiality, consistent with the obligations set forth in this Agreement and the Protective Order.
4.2 Protective Order Compliance
Expert shall comply in all respects with the Stipulated Protective Order entered in the Action (Docket Entry No. 30, filed August 19, 2024) (the "Protective Order"). The Protective Order establishes three tiers of confidentiality designation:
(i) "Confidential" — information that the producing party considers to be confidential business information;
(ii) "Highly Confidential — Attorneys' Eyes Only" — information that the producing party considers to be highly sensitive commercial or financial information, the disclosure of which to competing parties could cause significant competitive harm; and
(iii) "Highly Confidential — Source Code" — source code and related technical materials subject to enhanced access restrictions.
Expert is authorized to access documents and materials designated as "Confidential" and "Highly Confidential — Attorneys' Eyes Only" as a qualified recipient under the terms of the Protective Order. Expert understands that the financial data most critical to his analysis — including Lumicore's product-level revenue data, gross margins, and customer-specific information — is expected to be designated at the "Highly Confidential — Attorneys' Eyes Only" level, and Expert agrees to handle such materials accordingly.
Expert shall not access materials designated as "Highly Confidential — Source Code" unless separately authorized by C&H and permitted under the terms of the Protective Order. Given the nature of Expert's engagement as a damages expert (as opposed to a technical expert), it is not anticipated that access to source-code materials will be necessary.
Expert shall execute any acknowledgment form, undertaking, or other documentation required by the Protective Order prior to receiving any designated materials. A template of the Protective Order Acknowledgment Form is attached hereto as Exhibit B. Expert shall ensure that all Meridian support staff who will access designated materials also execute the required acknowledgment forms prior to receiving access.
4.3 Non-Disclosure Obligations
Expert shall not disclose any information obtained in connection with this engagement to any person or entity other than the following authorized recipients:
(a) C&H personnel working on the Action, including partners, associates, paralegals, and support staff;
(b) OWS personnel authorized by C&H to receive such information, to the extent consistent with the Protective Order;
(c) Co-retained experts, specifically Dr. Caroline Ashford and Gregory Falk, to the extent such disclosure is necessary for the coordination of expert analyses and is permitted under the Protective Order; and
(d) Meridian support staff who have been assigned to work on this engagement and who have signed appropriate confidentiality undertakings consistent with the requirements of this Agreement and the Protective Order.
Expert shall not disclose any information obtained in connection with this engagement to any other current or prospective client of Meridian, to any member of the press or media, to any academic institution, or to any other person or entity, regardless of whether such information is subject to a confidentiality designation under the Protective Order.
The obligations set forth in this Section 4.3 shall survive termination of this Agreement for a period of five (5) years following the date of termination or until the Protective Order expires or is modified by the Court, whichever is later.
4.4 Document Handling and Return
All documents and materials received from C&H or obtained by Expert in connection with the engagement shall be maintained in a secure manner consistent with the requirements of the Protective Order. Expert shall implement appropriate physical and electronic security measures to prevent unauthorized access to designated materials, including secure file storage, password-protected electronic files, and restricted access protocols for Meridian personnel.
Upon termination of the engagement or conclusion of the Action (including the resolution of any post-trial motions and appeals), Expert shall, at C&H's direction, either (a) return all confidential materials (including all copies, extracts, and summaries thereof) to C&H, or (b) destroy all such materials in a manner consistent with the Protective Order. Within thirty (30) days of completing the return or destruction, Expert shall provide C&H with a written certification of compliance, signed by Expert personally, confirming that all confidential materials have been returned or destroyed as directed.
SECTION 5 — INDEPENDENCE AND OBJECTIVITY
5.1 Independent Expert
Expert shall at all times act as an independent expert and shall not serve as an advocate for OWS. Expert's role is to provide objective, reliable, and well-supported economic opinions based on his independent professional judgment. Expert's opinions shall be based on his own independent analysis of the relevant facts, data, and applicable economic and financial principles, and shall not be dictated or unduly influenced by the litigation objectives of C&H or OWS.
Expert acknowledges his obligations under Federal Rule of Civil Procedure 26(a)(2)(B), which requires that his expert report contain a complete statement of all opinions to be expressed and the basis and reasons for them. Expert further acknowledges the requirements of Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and its progeny, and shall ensure that each opinion he offers is grounded in reliable principles and methods, is based on sufficient facts or data, and is the product of the reliable application of those principles and methods to the facts of the case. Expert understands that his opinions must be capable of withstanding scrutiny under Federal Rule of Evidence 702 and the Daubert framework, and Expert shall prepare his analyses accordingly.
5.2 Prior Engagement Disclosure
Expert represents that he has reviewed his personal records and the records of Meridian Economic Consulting Group, LLC, and confirms that neither he nor Meridian has any current or prior engagement that would create a conflict of interest with this retention or that would impair his ability to serve as an independent and objective expert in the Action.
Expert further represents that he has not previously been retained by, provided consulting services to, or had any professional engagement with Lumicore Technologies, Inc., or any of Lumicore's counsel of record in the Action, including Hawthorne Vega & Cruz LLP and Trask Eddington LLP, or any entity or individual affiliated with Lumicore in any capacity.
Expert further represents that he has not previously been retained by or provided services to Pinnacle Analytics Partners LLP or Dr. Natasha Volkov in any adversarial capacity, and that no prior engagement or relationship exists that could be characterized as creating an actual or apparent conflict of interest with respect to his role as OWS's testifying damages expert in opposition to Dr. Volkov's anticipated testimony.
Expert agrees that if, at any time during the course of this engagement, he becomes aware of any fact or circumstance that could give rise to an actual or potential conflict of interest, he shall promptly notify C&H in writing and shall take such steps as may be necessary to address the conflict, including withdrawal from the engagement if the conflict cannot be adequately resolved.
5.3 Disclosure of Prior Testimony
Expert shall provide C&H with a complete and accurate list of all cases in which he has testified as an expert at trial or by deposition within the preceding four (4) years, as required by Federal Rule of Civil Procedure 26(a)(2)(B)(v). This list shall be appended to Expert's Opening Expert Report and shall include the case name, court, case number, and the date(s) of testimony for each listed case. Expert shall update this list as necessary to ensure its accuracy through the date of filing of his expert report.
SECTION 6 — DATA AND MATERIALS
6.1 Materials to Be Provided by C&H
C&H shall make available to Expert all relevant documents, discovery materials, deposition transcripts, and other information reasonably necessary for Expert to form and support his opinions in connection with this engagement. C&H anticipates providing Expert with the following categories of materials, among others:
(a) OWS Financial Data. OWS's fiscal year 2023 audited financial statements, as prepared by Gresham & Whitfield LLP, OWS's independent auditor, together with OWS's internal product-line financial statements and management reports showing, among other things, gross margins of approximately 47.3% on OWS's competing products (OWS-400ZR and OWS-800XR);
(b) Lumicore Financial Data. Lumicore's product-level financial data as produced in discovery, which is expected to be designated "Highly Confidential — Attorneys' Eyes Only" under the Protective Order. This data includes gross margins on the Accused Products (ranging from approximately 52.1% to 58.3%), average selling prices, unit volumes, customer-by-customer revenue breakdowns, and cost-of-goods-sold data;
(c) Lumicore Public Filings. Lumicore's 10-K annual report and other public filings with the Securities and Exchange Commission. Lumicore's estimated fiscal year 2023 revenue was approximately $312.6 million. Lumicore completed its initial public offering in March 2022 at $24.00 per share. As of the date of this Agreement, Lumicore's share price is approximately $37.00 per share, with approximately 91.8 million shares outstanding, implying a market capitalization of approximately $3.4 billion;
(d) Accused Product Revenue Data. Detailed revenue data for each of the three Accused Products, including: LumiLink 400G-ZR+ (fiscal year 2023 revenue: approximately $94.8 million), LumiLink 800G-DR8 (fiscal year 2023 revenue: approximately $128.4 million), and LumiEdge 1600G-LR (fiscal year 2023 revenue: approximately $41.7 million), totaling approximately $264.9 million in fiscal year 2023. Total Accused Product revenue for the infringement period from the third quarter of 2022 through the first quarter of 2024 was approximately $378.2 million. Projected total Accused Product revenue through trial (covering the third quarter of 2022 through the fourth quarter of 2025) is approximately $714.6 million;
(e) Comparable License Agreements. Copies of the OWS-Terralink Semiconductor license agreement, the OWS-NovaWave Corp. license agreement, and the OWS-Helix Integrated Photonics license agreement, together with any available supporting negotiation correspondence. C&H shall also provide copies of industry-comparable licensing transactions, including the Stratos Photonics v. ArcLight Systems settlement license and the Coreline Technologies v. Prisma Semiconductor license agreement, to the extent such agreements are available;
(f) FairPoint Licensing Correspondence. All correspondence and records relating to FairPoint Licensing Group, LLC's licensing campaign directed at Lumicore on behalf of OWS, including the January 15, 2023 initial licensing letter, the May 15, 2023 follow-up letter, and records of the April 20, 2023 in-person meeting between FairPoint representatives and Lumicore's licensing team;
(g) Deposition Transcripts. Transcripts of depositions taken in the Action that are relevant to Expert's damages analysis, including the depositions of: Dr. Sandra Michaud (Lumicore Chief Technology Officer, deposed November 19, 2024), Raymond Bautista (Lumicore General Counsel, deposed December 3, 2024), and Angela Reeves (FairPoint Licensing Group, deposed December 10, 2024), as well as any additional depositions taken during the fact and expert discovery periods;
(h) Claim Construction Materials. All claim construction briefing filed in connection with the Markman hearing scheduled for March 14, 2025, and any resulting Markman order, to the extent such materials are relevant to the scope of the asserted patent claims and the identification of infringing features in the Accused Products;
(i) Other Expert Reports. Upon completion, the technical/infringement expert reports prepared by Dr. Caroline Ashford (Northfield Institute of Technology) and the industry expert report prepared by Gregory Falk, to the extent relevant to Expert's damages analysis and the coordination of expert opinions.
C&H shall use reasonable efforts to provide materials to Expert on a rolling basis as they become available through discovery, and shall prioritize the production of financial data and comparable license agreements to enable Expert to begin his analysis promptly.
6.2 Access to Reverse-Engineering Data
Expert may request and receive access to teardown reports and product analyses prepared by Benchmark Semiconductor Analysis, LLC (Lead Engineer: Kevin Ng, located at 2244 Mission College Boulevard, Santa Clara, California 95054) for each of the three Accused Products. Such access shall be provided to the extent the teardown data is relevant to Expert's damages quantification — for example, bill-of-materials analyses, component cost estimations, and identification of the patented components within the Accused Products — and shall be subject to any applicable confidentiality designations under the Protective Order.
6.3 Expert's Own Research
Expert may conduct independent research in connection with this engagement, including analysis of publicly available financial data, industry reports and market studies, pricing data, economic and academic literature, and other publicly available information relevant to the semiconductor and silicon-photonics transceiver markets. All materials considered by Expert in forming his opinions, including materials obtained through independent research, shall be identified and disclosed in his expert report as required by Federal Rule of Civil Procedure 26(a)(2)(B)(ii).
SECTION 7 — REPORT AND TESTIMONY OBLIGATIONS
7.1 Expert Report Requirements
Expert's Opening Expert Report shall comply fully with the requirements of Federal Rule of Civil Procedure 26(a)(2)(B), and shall include each of the following:
(i) A complete statement of all opinions to be expressed by Expert and the bases and reasons for each opinion;
(ii) A description of the facts and data considered by Expert in forming his opinions, including all documents, data, financial models, and other materials reviewed and relied upon;
(iii) All exhibits to be used as a summary of or support for Expert's opinions, including charts, graphs, tables, financial models, and other demonstrative materials incorporated into the report;
(iv) Expert's qualifications, including a current curriculum vitae and a list of all publications authored by Expert within the preceding ten (10) years;
(v) A list of all cases in which Expert has testified as an expert at trial or by deposition within the preceding four (4) years, including the case name, court, case number, and date(s) of testimony; and
(vi) A statement of the compensation to be paid to Expert for his study and testimony in this case.
Expert's Rebuttal Expert Report shall comply with the same requirements to the extent applicable, and shall specifically address the opinions, methodologies, and conclusions set forth in Lumicore's damages expert report.
7.2 Report Deadlines
The following deadlines apply to Expert's written reports:
• Opening Expert Report: Due June 15, 2025, in accordance with the Scheduling Order (D.E. 27, issued August 12, 2024).
• Rebuttal Expert Report: Due on or before July 15, 2025, in accordance with the Scheduling Order (D.E. 27).
Expert acknowledges the critical importance of meeting these deadlines and agrees to manage his workload and allocate sufficient resources to ensure timely delivery. In the event that Expert anticipates any difficulty in meeting either deadline, he shall notify C&H as far in advance as reasonably practicable so that C&H may assess whether to seek a modification of the Scheduling Order or take other appropriate action.
7.3 Deposition Availability
Expert shall make himself available for deposition within the expert discovery period, which closes on August 15, 2025. The deposition shall take place at a mutually convenient location to be agreed upon by the Parties and Lumicore's counsel. C&H anticipates that the deposition will be taken by Hawthorne Vega & Cruz LLP, through Kate Rourke and/or Darren Cho, Lumicore's lead trial counsel.
C&H shall provide Expert with deposition preparation assistance, including a detailed preparation memorandum and one or more preparation sessions in advance of the deposition. The preparation memorandum is expected to address anticipated lines of cross-examination, including but not limited to: challenges to Expert's market-share displacement assumption of 38.2%, questions regarding apportionment and the application of the entire market value rule, challenges to Expert's reasonable royalty base and rate, and questions regarding the reliability and comparability of the license agreements relied upon by Expert. Expert shall cooperate fully with C&H in preparing for the deposition.
7.4 Trial Availability
Expert shall reserve the period from February 2, 2026 through February 14, 2026 (inclusive) for trial testimony in the Action. This reservation covers the estimated seven-to-ten-day jury trial plus potential scheduling buffers to accommodate unforeseen delays or changes in the trial schedule. Trial will take place in the United States District Court for the Eastern District of Texas, marshall Division, in Tyler, Texas.
Expert shall coordinate with C&H on the preparation of trial demonstratives for the damages module, including joint preparation sessions, review of draft demonstratives, and rehearsal of direct examination testimony. Expert shall arrive in Tyler, Texas sufficiently in advance of his anticipated testimony date to permit adequate in-person preparation with the C&H trial team.
SECTION 8 — REPRESENTATIONS AND WARRANTIES
8.1 Expert Representations
Expert represents and warrants to C&H and OWS as follows:
(a) Qualifications. Expert possesses the education, training, professional experience, and specialized knowledge necessary to serve as a testifying damages expert in patent infringement litigation, including specific experience in matters involving semiconductor, photonics, and telecommunications technologies. Expert's qualifications are accurately reflected in his current curriculum vitae, a copy of which has been provided to C&H.
(b) Commitment of Time and Resources. Expert will devote adequate time and resources to this engagement to meet all deadlines established by the Scheduling Order, this Agreement, and C&H's reasonable requests, including the timely preparation of the Opening Expert Report by June 15, 2025, the Rebuttal Expert Report by July 15, 2025, and availability for deposition and trial as specified herein.
(c) Reliability of Opinions. Expert's opinions shall be based on reliable principles and methods, applied to sufficient facts or data, in a manner consistent with the standards established by Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), Federal Rule of Evidence 702, and applicable precedent in the United States Court of Appeals for the Federal Circuit and the Eastern District of Texas.
(d) No Undisclosed Conflicts. Expert has no undisclosed conflicts of interest that would impair his ability to serve as an independent and objective expert in this engagement, and Expert has made full and accurate disclosure of all prior engagements and relationships that could bear on the question of conflicts of interest.
(e) Professional Liability Insurance. Expert and Meridian carry professional liability (errors and omissions) insurance with minimum coverage of Five Million Dollars ($5,000,000) per occurrence, issued by a carrier rated A- or better by A.M. Best, and such insurance will remain in effect throughout the duration of this engagement. Expert shall provide C&H with a certificate of insurance upon request.
8.2 C&H Representations
C&H represents and warrants to Expert and Meridian as follows:
(a) Authority. C&H is duly authorized to retain Expert on behalf of OWS for the services described in this Agreement. C&H has obtained all necessary approvals from OWS to enter into this Agreement and to incur the fees and expenses contemplated herein.
(b) Access to Information. C&H will provide Expert with access to all documents, discovery materials, and information reasonably necessary for Expert to form and support his opinions, in a timely manner and consistent with the requirements of the Protective Order.
(c) Timely Payment. C&H will make timely payment of all conforming invoices submitted by Meridian in accordance with the payment terms set forth in Section 2.4 of this Agreement.
(d) Budget Authorization. The engagement of Expert and the associated Estimated Budget have been authorized under C&H's engagement letter with OWS dated March 18, 2024, and the litigation budget approved by OWS and its principal investor, Ridgeline Capital Partners, LP, pursuant to OWS Board Resolution No. 2024-07, approved April 2, 2024. C&H confirms that the retention of Expert and the financial commitments set forth in this Agreement are within the scope of such authorization.
SECTION 9 — TERM AND TERMINATION
9.1 Effective Date
This Agreement is effective as of August 5, 2024, the date first written above.
9.2 Term. The engagement shall continue until the earliest to occur of the following: (a) the conclusion of the Action, including any post-trial motions and appeals for which Expert's services are required; (b) the settlement of the Action on terms that render Expert's further services unnecessary, as determined by C&H; or (c) the termination of this Agreement by either Party pursuant to Section 9.3 below.
9.3 Termination. Either Party may terminate this Agreement upon thirty (30) days' prior written notice to the other Party. During the notice period, Expert shall continue to perform services as requested by C&H, and C&H shall continue to make timely payment for services rendered.
Notwithstanding the foregoing, C&H may terminate this Agreement immediately, without a notice period, upon the occurrence of any of the following events:
(a) Expert's failure to meet a material deadline established by the Scheduling Order or this Agreement, including the deadlines for the Opening Expert Report and Rebuttal Expert Report, unless such failure is caused by circumstances beyond Expert's reasonable control and Expert has provided C&H with reasonable advance notice of the anticipated delay;
(b) Expert's breach of the confidentiality obligations set forth in Section 4 of this Agreement or the Protective Order;
(c) The discovery or emergence of a conflict of interest that cannot be adequately resolved and that, in C&H's reasonable judgment, compromises Expert's ability to serve as an independent and credible expert in the Action; or
(d) Expert's material breach of any other provision of this Agreement.
Expert may terminate this Agreement immediately, without a notice period, in the event that C&H fails to pay any undisputed invoice within sixty (60) days of its due date, provided that Expert has given C&H written notice of such non-payment and C&H has failed to cure the non-payment within fifteen (15) days of receiving such notice.
Upon termination of this Agreement for any reason, Expert shall be entitled to compensation for all services rendered and expenses incurred through the effective date of termination. The Retainer (or any remaining balance thereof) shall be applied to any outstanding amounts owed to Expert, and any excess retainer funds shall be refunded to C&H within thirty (30) days of the effective date of termination.
9.4 Survival. The following provisions of this Agreement shall survive the termination or expiration of this Agreement: Section 4 (Confidentiality and Protective Order Compliance), Section 5 (Independence and Objectivity), Section 10 (Indemnification), and Section 11 (Governing Law and Dispute Resolution).
SECTION 10 — INDEMNIFICATION
10.1 C&H Indemnification of Expert
C&H, on behalf of OWS, shall indemnify, defend, and hold harmless Expert and Meridian, and their respective officers, directors, members, managers, employees, and agents, from and against any and all third-party claims, demands, actions, liabilities, losses, damages, costs, and expenses (including reasonable attorneys' fees) arising out of or in connection with Expert's performance of services under this Agreement, except to the extent that such claims arise from Expert's gross negligence, willful misconduct, or breach of this Agreement. This indemnification obligation shall extend to any claims arising from Lumicore or any third party challenging Expert's role, opinions, or conduct in connection with the Action, provided that Expert has acted in good faith and in accordance with the terms of this Agreement.
10.2 Expert Indemnification of C&H