APPENDIX D
WILLFUL INFRINGEMENT ENHANCEMENT ANALYSIS
Expert Report of Dr. Lawrence Keating — Damages
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
Hon. James R. Gilstrap
DRAFT — ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL
Expert: Dr. Lawrence Keating Managing Director Meridian Economic Consulting Group, LLC 233 South Wacker Drive, Suite 4400 Chicago, Illinois 60606
Draft Dated: June 15, 2025
Prepared in connection with engagement by: Calderwood & Harkness LLP on behalf of Optiwave Semiconductor Corp.
SECTION I: PURPOSE AND SCOPE OF APPENDIX D
I.A. Engagement and Assignment
1. I, Dr. Lawrence Keating, was retained on August 5, 2024 by Calderwood & Harkness LLP ("C&H") on behalf of Optiwave Semiconductor Corp. ("OWS" or "Plaintiff") to provide expert opinions on patent damages in the matter captioned Optiwave Semiconductor Corp. v. Lumicore Technologies, Inc., Case No. 2:24-cv-00319-JRG, pending in the United States District Court for the Eastern District of Texas, marshall Division, before the Honorable James R. Gilstrap. I am compensated for my work in this matter at a rate of $875 per hour. The estimated total budget for my engagement across all appendices and deliverables is approximately $950,000. My compensation is not contingent upon the opinions I express or the outcome of this litigation.
2. The scope of this Appendix D is to quantify the enhanced damages component attributable to Lumicore Technologies, Inc.'s ("Lumicore" or "Defendant") alleged willful infringement of the following United States patents (collectively, the "Asserted Patents"):
(a) U.S. Patent No. 10,234,847 (the "'847 Patent");
(b) U.S. Patent No. 10,891,193 (the "'193 Patent");
(c) U.S. Patent No. 9,678,562 (the "'562 Patent"); and
(d) U.S. Patent No. 11,402,015 (the "'015 Patent").
3. In preparing this Appendix, I have applied principles of economics, finance, and accounting to the facts and evidence available in this case in order to calculate the enhanced damages that may be awarded to OWS under 35 U.S.C. § 284 in the event the Court or jury determines that Lumicore's infringement was willful. My analysis is grounded in the same data, methodologies, and assumptions that underlie the main body of my Expert Report and the accompanying appendices. Specifically, this Appendix D should be read in conjunction with:
• Main Report: Summary of opinions, economic framework, and market background;
• Appendix A: Lost Profits Model, including the Panduit analysis and market-share displacement methodology;
• Appendix B: Georgia-Pacific Factor Analysis, establishing the reasonable royalty framework and rate determination; and
• Appendix C: Royalty Rate Benchmarking, providing the comparable license analysis supporting the 8.5% royalty rate.
4. All opinions expressed herein are based upon my education, training, and experience in the field of patent damages economics, the materials I have reviewed and relied upon (enumerated in Section IX below), and the analytical work I have performed. My opinions are held to a reasonable degree of economic certainty. I reserve the right to supplement or amend this Appendix as additional discovery is produced and as the case proceeds toward trial.
I.B. Summary of Opinions
5. Based on my analysis, I hold the following opinions, each of which is discussed in greater detail in the sections that follow:
(a) Post-Notice Period. Enhanced damages, if awarded, should apply to the post-notice period beginning January 15, 2023, which is the date that FairPoint Licensing Group, LLC ("FairPoint"), acting as OWS's licensing agent, sent the first formal licensing and notice letter to Lumicore's General Counsel, Raymond Bautista. This letter provided Lumicore with actual written notice of OWS's patent rights and specific infringement allegations. The post-notice period extends through the projected trial date, with damages calculated through the end of Q4 2025 (approximately December 31, 2025), consistent with the damages model in Appendix A.
(b) Post-Notice Lost Profits. Post-notice lost profits, calculated using the Panduit framework as applied in my main report and Appendix A but limited to the post-notice period, are approximately $109.2 million. This figure represents the single-damages lost-profit amount attributable to the period after Lumicore received actual written notice of OWS's patent rights.
(c) Enhancement Range. Under the Read factor framework and applying various multiplier scenarios—1.5×, 2.0×, and the statutory maximum of 3.0×—the enhancement above single damages (i.e., the additional amount beyond the $109.2 million in single damages) ranges from approximately $54.6 million (at 1.5×) to approximately $218.4 million (at 3.0×). At the 2.0× level that I believe is economically justified, the enhancement above single damages is approximately $109.2 million, bringing total enhanced post-notice lost profits to approximately $218.4 million.
(d) Aggregate Damages. The willful infringement enhancement is a component of the aggregate damages demand of approximately $210.0 million as pled in the Complaint. The $210.0 million figure reflects a blended, rounded, conservative estimate that does not represent a simple arithmetic sum of individual theory maxima but rather incorporates OWS's blended view of multiple damages theories.
6. In the sections that follow, I set forth the factual and analytical basis for each of these opinions in detail.
SECTION II: LEGAL FRAMEWORK FOR ENHANCED DAMAGES
II.A. Statutory Authority — 35 U.S.C. § 284
7. Section 284 of the Patent Act provides, in relevant part, that upon finding for the claimant in a patent infringement action, "the court may increase the damages up to three times the amount found or assessed." 35 U.S.C. § 284. The statute thus grants the trial court discretionary authority to enhance a damages award by up to a factor of three when the circumstances of the case warrant such an increase. Enhancement is not mandatory; rather, it is committed to the sound judgment of the trial court based on the totality of the circumstances presented by the evidence.
8. The purpose of enhanced damages is to address cases of egregious infringement behavior and to serve as a deterrent against willful and deliberate patent infringement. Enhanced damages are not intended to be awarded in every case, nor are they intended to be punitive per se, but they serve an important compensatory and deterrent function in the patent system. The availability of enhancement ensures that infringers cannot simply calculate the cost of a potential damages award and treat it as a cost of doing business, particularly where the infringer had knowledge of the patent rights and chose to proceed with infringing activity nonetheless.
9. I understand that the determination of whether to award enhanced damages is a legal question for the Court, informed by the jury's factual finding on willfulness. My role as a damages expert is to provide the economic framework for calculating the enhanced damages amount under various multiplier scenarios, so that the Court and jury have a clear and reliable basis for assessing the appropriate level of enhancement should willfulness be found.
II.B. Supreme Court Standard — *Halo Electronics, Inc. v. Pulse Electronics, Inc.*, 579 U.S. 93 (2016)
10. In Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93 (2016), the Supreme Court addressed the standard for awarding enhanced damages under 35 U.S.C. § 284. The Court rejected the rigid two-part test that had been established by the Federal Circuit in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), which had required a showing of objective recklessness as a threshold matter. The Supreme Court found the Seagate test to be "unduly rigid" and inconsistent with the text of § 284 and the statute's historical application.
11. Under Halo, enhanced damages are reserved for cases of "egregious infringement behavior"—that is, conduct involving "willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or, indeed, characteristic of a pirate." 579 U.S. at 103-04. The inquiry is subjective, focusing on the infringer's knowledge and intent, rather than requiring the objective recklessness threshold that had characterized the Seagate framework. A district court's exercise of discretion in awarding enhanced damages is reviewed on appeal only for abuse of that discretion, providing the trial court with broad latitude in assessing the appropriate level of enhancement.
12. The Halo decision emphasized that § 284 calls for a totality-of-the-circumstances approach. The Court observed that the trial court should consider the "particular circumstances of the case" in deciding whether to exercise its discretion to enhance damages and, if so, by how much. The Court also noted that "[t]he sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or indeed characteristic of a pirate." 579 U.S. at 103-04.
13. For purposes of my analysis, I have applied the economic framework for calculating enhanced damages under the assumption that the Court and jury may find Lumicore's infringement to be willful under the Halo standard, and I have constructed my damages scenarios to provide the Court with the range of available enhancement amounts depending on the multiplier selected.
II.C. The Read Factor Framework
14. Following Halo, courts in this district and others have continued to apply the nine-factor framework set forth in Read Corp. v. Portec, Inc., 970 F.2d 816, 826-27 (Fed. Cir. 1992), as a guide to the exercise of discretion in determining whether and to what extent to enhance damages under § 284. The nine Read factors are:
(1) Whether the infringer deliberately copied the ideas or design of another;
(2) Whether the infringer, when it knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed;
(3) The infringer's behavior as a party to the litigation;
(4) The infringer's size and financial condition;
(5) The closeness of the case;
(6) The duration of the misconduct;
(7) Any remedial action taken by the infringer;
(8) The infringer's motivation for harm; and
(9) Whether the infringer attempted to conceal its misconduct.
15. The Read factors are not exclusive, and no single factor is dispositive. Courts weigh the factors in the context of the totality of the circumstances, consistent with the Halo framework. The factors collectively address the infringer's state of mind, the egregiousness of its conduct, the harm caused, and the infringer's ability to bear the consequences of enhancement.
16. I note that the ultimate willfulness determination is a legal question for the Court and jury. My analysis in Section VI of this Appendix provides the economic framework for assessing the Read factors from a damages perspective, including the economic implications of each factor as it relates to the appropriate level of enhancement. I do not opine on the legal conclusion of willfulness itself; rather, I identify the economic evidence relevant to each factor and explain its implications for the enhanced damages calculation.
SECTION III: IDENTIFICATION OF THE POST-NOTICE DAMAGES PERIOD
III.A. Pre-Notice Period: Q3 2022 – January 14, 2023
17. The overall infringement period in this case begins in the third quarter of 2022 (Q3 2022), when Lumicore first launched the LumiLink 400G-ZR+ silicon-photonics transceiver module into the commercial market. This was the first of Lumicore's three accused product lines, and its introduction marked the beginning of the conduct that OWS alleges constitutes infringement of the '847 Patent, the '193 Patent, and the '562 Patent.
18. OWS's internal engineering team, led by senior engineers within OWS's intellectual Property and Technology Assessment group, identified potential infringement of OWS's patents by the LumiLink 400G-ZR+ in approximately October 2022. This identification was based on a preliminary analysis of publicly available product specifications, marketing materials, and technical data sheets published by Lumicore in connection with the commercial launch of the LumiLink 400G-ZR+.
19. Following the identification of potential infringement, OWS retained Benchmark Semiconductor Analysis, LLC ("Benchmark"), an independent semiconductor teardown and reverse-engineering firm, in November 2022 to perform a detailed physical teardown and analysis of the LumiLink 400G-ZR+ module. The teardown was conducted under the supervision of Kevin Ng, Lead Engineer at Benchmark, who has extensive experience in the analysis of silicon-photonics devices and semiconductor manufacturing processes.
20. Benchmark delivered its initial teardown report on December 12, 2022. The report confirmed the use of accused waveguide multiplexer structures and thermal management micro-channels in the LumiLink 400G-ZR+ that, in the opinion of Benchmark's engineers, corresponded to the claimed structures of the '847 Patent, the '193 Patent, and the '562 Patent. The teardown report provided the factual foundation for the subsequent notice and licensing activities described below.
21. During the pre-notice period—that is, from Q3 2022 through January 14, 2023—Lumicore had not yet received formal written notice of OWS's patents or infringement allegations. While infringement damages are recoverable during this pre-notice period under the marking and notice provisions of 35 U.S.C. § 287, enhancement of damages is typically not sought for conduct occurring before the infringer received actual knowledge of the asserted patents. Accordingly, pre-notice period damages are addressed in the main body of my Expert Report and in Appendix A (Lost Profits Model), and enhancement is not sought for the pre-notice period.
III.B. Triggering Event: FairPoint First Licensing Letter — January 15, 2023
22. On January 15, 2023, FairPoint Licensing Group, LLC ("FairPoint"), acting as OWS's authorized licensing agent, sent the first formal licensing and notice letter (the "First Notice Letter") to Lumicore's General Counsel, Raymond Bautista. The First Notice Letter was prepared under the direction of Angela Reeves, Managing Director of FairPoint, and was sent via both certified mail and electronic mail to Lumicore's headquarters address and to Mr. Bautista's verified professional email address.
23. The First Notice Letter specifically identified three of the four Asserted Patents—the '847 Patent (U.S. 10,234,847), the '193 Patent (U.S. 10,891,193), and the '562 Patent (U.S. 9,678,562)—and specifically accused the LumiLink 400G-ZR+ silicon-photonics transceiver module of infringing one or more claims of each identified patent. The letter included a summary of the relevant patent claims, a high-level description of the accused features of the LumiLink 400G-ZR+ that OWS contended practiced those claims, and an invitation to enter into licensing negotiations.
24. The First Notice Letter established actual written notice to Lumicore of OWS's patent rights and infringement allegations. This letter marks the beginning of the post-notice damages period for purposes of my enhanced damages analysis. From this date forward, Lumicore had actual knowledge of OWS's patents, the specific infringement allegations, and OWS's willingness to engage in licensing discussions. Any continued infringement after this date occurred with full awareness of the asserted patent rights.
III.C. Subsequent Notice Events
25. Following the First Notice Letter, a series of communications and events further reinforced Lumicore's knowledge of OWS's patent rights and infringement allegations. I summarize these events chronologically below, as each event is relevant to the Read factor analysis in Section VI and to the delineation of the post-notice damages period.
26. February 28, 2023: Lumicore's Initial Response. Lumicore responded to the First Notice Letter through its outside counsel, Hawthorne Vega & Cruz LLP ("HVC"), by letter dated February 28, 2023. The response was authored by Catherine "Kate" Rourke, a partner at HVC. In the response, Lumicore disputed that the LumiLink 400G-ZR+ infringed any of the identified patents and raised questions regarding the validity of the asserted claims. The response did not include any substantive analysis of the patent claims or any identification of specific non-infringing design features. Notably, the response did not indicate that Lumicore intended to cease production or sales of the LumiLink 400G-ZR+ or to undertake any design-around efforts.
27. April 20, 2023: In-Person Licensing Meeting, Austin, Texas. On April 20, 2023, representatives of FairPoint, OWS, and Lumicore met in person at a conference facility in Austin, Texas, for a licensing negotiation meeting. Attendees included Angela Reeves (FairPoint Managing Director), Rebecca Tanaka (OWS General Counsel), Raymond Bautista (Lumicore General Counsel), and Kate Rourke (HVC). The meeting lasted approximately three hours. According to the deposition testimony of Angela Reeves, taken on December 10, 2024, Lumicore's representatives showed "no interest in negotiating" a license. Ms. Reeves testified that Mr. Bautista and Ms. Rourke reiterated their position that Lumicore's products did not infringe, without providing any technical basis for that position, and that the meeting ended without any resolution or agreement on next steps. No follow-up meeting was scheduled.
28. May 15, 2023: FairPoint Second Licensing Letter. On May 15, 2023, FairPoint sent a second licensing and notice letter (the "Second Notice Letter") to Lumicore, again directed to Raymond Bautista. The Second Notice Letter expanded OWS's assertions in two important respects. First, it added the '015 Patent (U.S. 11,402,015, issued August 2, 2022) to the list of asserted patents. Second, it expanded the list of accused products to include the LumiLink 800G-DR8, which Lumicore had launched in Q1 2023—that is, after Lumicore received the First Notice Letter. The Second Notice Letter reiterated OWS's invitation to engage in licensing discussions and provided additional claim-chart-level detail for each of the four Asserted Patents as applied to each of the two then-available accused products.
29. July 10, 2023: Lumicore's Formal Declination. By letter dated July 10, 2023, Lumicore formally declined to take a license to OWS's patents. In the declination letter, Lumicore stated that it had obtained "competent legal opinions" concluding that its products do not infringe the Asserted Patents. Lumicore did not provide these opinion letters to OWS. As of the date of this Appendix, Lumicore has refused to produce these opinion-of-counsel letters in discovery, asserting attorney-client privilege and work-product protection. This refusal is the subject of OWS's Motion to Compel, filed as Docket Entry No. 40 in this action.
30. Q4 2023: Launch of LumiEdge 1600G-LR. In the fourth quarter of 2023, Lumicore launched its third accused product line, the LumiEdge 1600G-LR silicon-photonics transceiver module. This product launch occurred after Lumicore had received notice of all four Asserted Patents—including the '193 Patent and the '015 Patent, which OWS alleges the LumiEdge 1600G-LR infringes. Critically, Raymond Bautista admitted in his December 3, 2024 deposition that no formal design-around analysis was commissioned before the LumiEdge 1600G-LR launch. This admission is significant because it indicates that Lumicore proceeded to develop and launch a new product that it knew was accused of infringing OWS's patents without taking even the basic step of assessing whether the new product could be designed to avoid the asserted claims.
31. April 22, 2024: Complaint Filed. On April 22, 2024, OWS filed its Complaint in this action, initiating Case No. 2:24-cv-00319-JRG. The Complaint asserts infringement of all four Asserted Patents and seeks damages, including enhanced damages for willful infringement, and injunctive relief.
III.D. Post-Notice Period Defined
32. For purposes of my enhanced damages analysis, the post-notice period is defined as the period from January 15, 2023 (the date of the First Notice Letter) through the projected trial date of February 2, 2026. Consistent with the overall damages model set forth in my main report and Appendix A, I have calculated damages through the end of Q4 2025 (approximately December 31, 2025), which represents the latest period for which reliable revenue projections can be constructed based on available data and market trends.
33. The post-notice period spans approximately 36 months (January 15, 2023 through approximately December 31, 2025). During this period, all three accused product lines were actively sold in the market, and Lumicore's accused-product revenue grew substantially. As I demonstrate in Section IV below, the overwhelming majority of Lumicore's total infringement-period revenue falls within the post-notice period, reflecting both the natural ramp of product revenue over time and the launch of the LumiLink 800G-DR8 and LumiEdge 1600G-LR during the post-notice period.
SECTION IV: CALCULATION OF POST-NOTICE ACCUSED-PRODUCT REVENUE
IV.A. Accused Products and Revenue Sources
34. Lumicore's three accused product lines are the core of the revenue base upon which the enhanced damages calculation is built. Each product line, its launch date, and its accused patents are summarized in the table below:
35. The revenue data underlying my analysis is drawn from three principal sources. First, I have reviewed Lumicore's public segment disclosures as reported in its 10-K annual filings with the Securities and Exchange Commission, which provide aggregate revenue figures for the relevant business segments but do not provide product-level breakdowns. Second, I have reviewed and relied upon product-level financial data produced by Lumicore in discovery, which has been designated "Highly Confidential — Attorneys' Eyes Only" under the Protective Order entered in this case. This product-level data includes revenue, cost of goods sold, gross profit, gross margin, average selling prices, and unit volumes for each accused product line, broken down by quarter and by customer. Third, I have reviewed Lumicore's responses to OWS's First Set of Interrogatories, which provide additional detail on revenue attribution, customer identity, and product shipment data.
36. I have cross-referenced the product-level financial data produced in discovery against Lumicore's public 10-K segment disclosures to verify the consistency and reliability of the data. My analysis confirms that the product-level data reconciles to the public disclosures within expected rounding tolerances, and I am satisfied that the financial data relied upon in this Appendix is reliable and suitable for use in my enhanced damages calculations.
IV.B. FY 2023 Accused-Product Revenue (Full Year)
37. For the fiscal year ended December 31, 2023, Lumicore's accused-product revenue, as reflected in the product-level financial data produced in discovery, was as follows:
38. The FY 2023 revenue figures above represent the full calendar year 2023. It is notable that the LumiLink 800G-DR8 generated $128.4 million in its first full year of availability, reflecting strong customer demand and rapid adoption in the hyperscale data-center market. The LumiEdge 1600G-LR generated $41.7 million despite launching in Q4 2023, indicating a rapid initial ramp. These figures are significant because each of these product launches occurred during the post-notice period—that is, after Lumicore had received actual written notice of OWS's patent rights—and the revenue generated by these products during the post-notice period constitutes the primary base for the enhanced damages calculation.
39. For context, Lumicore's total company-wide revenue for FY 2023 was approximately $312.6 million, as reported in its 10-K filing. The three accused product lines thus represented approximately 84.7% of Lumicore's total revenue for the year, underscoring the centrality of the accused products to Lumicore's business.
IV.C. Total Infringement-Period Revenue (Q3 2022 – Q1 2024)
40. For the period from Q3 2022 (the initial launch of the LumiLink 400G-ZR+) through Q1 2024 (the last full quarter before the Complaint was filed on April 22, 2024), total accused-product revenue across all three product lines was approximately $378.2 million, based on my preliminary analysis of the quarterly financial data produced in discovery. This figure encompasses both the pre-notice period (Q3 2022 through January 14, 2023) and the post-notice period through Q1 2024. The detailed quarterly breakdown is set forth in Exhibit D-1 to this Appendix.
IV.D. Projected Total Revenue Through Trial (Q3 2022 – Q4 2025)
41. Projecting accused-product revenue through the end of Q4 2025—the end of the damages period used in my model—I estimate that total accused-product revenue across the entire infringement period (Q3 2022 through Q4 2025) will be approximately $714.6 million. This projection is based on the same methodology and assumptions described in detail in Appendix A, including growth rate analysis, product lifecycle modeling, and market-share trend analysis. The projection incorporates actual revenue data through the most recent quarter for which data has been produced, supplemented by forward-looking estimates that account for expected market conditions, pricing trends, and competitive dynamics in the silicon-photonics transceiver market.
42. The post-notice portion of this total is derived by subtracting pre-notice revenue (Q3 2022 through January 14, 2023) from the total. The pre-notice revenue consists of partial-quarter revenue from the LumiLink 400G-ZR+ only, as this was the sole accused product available during the pre-notice period. The LumiLink 800G-DR8 and LumiEdge 1600G-LR were not launched until Q1 2023 and Q4 2023, respectively, both of which dates fall within the post-notice period. Accordingly, the substantial majority of the $714.6 million total falls within the post-notice period, as Lumicore's revenue growth has been concentrated in the 2023–2025 timeframe with all three product lines active and generating increasing revenue.
IV.E. Revenue Apportionment to Post-Notice Period
43. The detailed quarter-by-quarter revenue tables, including the precise apportionment between pre-notice and post-notice periods, are set forth in Exhibit D-1 to this Appendix. The post-notice revenue base used in my enhanced damages calculation is the same revenue base from which post-notice lost profits are derived in Appendix A. I have verified the internal consistency of the revenue figures used across all appendices to my Expert Report, and I confirm that the revenue data presented in this Appendix is fully consistent with the data presented in Appendices A, B, and C.
44. To summarize the revenue apportionment: the pre-notice period encompasses approximately five months of revenue from a single product line (the LumiLink 400G-ZR+, from its Q3 2022 launch through January 14, 2023), while the post-notice period encompasses approximately thirty-six months of revenue from all three accused product lines. The post-notice period thus accounts for the vast majority of the total infringement-period revenue. The precise dollar amount of post-notice revenue is set forth in Exhibit D-1 and is used as the input for the post-notice lost profits calculation in Section V below.
SECTION V: POST-NOTICE LOST PROFITS CALCULATION
V.A. Methodology.
45. Post-notice lost profits are calculated using the same Panduit framework that I applied in the main body of my Expert Report and in Appendix A, but limited to the post-notice period (January 15, 2023 onward). The Panduit test, as established in Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978), and widely adopted by the Federal Circuit, requires a patent holder to demonstrate four factors to recover lost profits:
(1) Demand for the Patented Product. OWS's total revenue for FY 2023 was $487.3 million, of which approximately $310 million was attributable to products practicing one or more of the Asserted Patents, including the OWS-400ZR, OWS-800XR, and OWS-1600DR families of silicon-photonics transceiver modules. These products compete directly with Lumicore's accused products in the same hyperscale data-center transceiver market. The evidence of substantial and growing demand for these products—driven by the accelerating deployment of high-bandwidth optical interconnects in hyperscale data centers—confirms the existence of demand for the patented technology during the post-notice period.
(2) Absence of Acceptable Non-Infringing Substitutes. I have analyzed four potential alternative products and technologies that might serve as non-infringing substitutes for the accused products. Each of these alternatives lacks one or more of the key patented features—specifically, the waveguide multiplexer architecture with low insertion loss, the embedded micro-channel heat-sink structures, and the polarization-diverse grating coupler—that differentiate the accused products and their OWS counterparts from other offerings in the market. The absence of acceptable non-infringing substitutes supports the conclusion that, but for Lumicore's infringement, the sales made by Lumicore would have been captured by OWS. A detailed analysis of each potential substitute is set forth in Appendix A.
(3) Manufacturing and Marketing Capability. OWS has demonstrated the manufacturing capacity and marketing capability to serve the demand displaced by Lumicore's infringing sales. OWS contracts with multiple foundry partners for the fabrication of its silicon-photonics devices and has confirmed through discovery responses that its foundry partners had available capacity during the relevant period to accommodate additional production volumes. OWS's existing sales and marketing infrastructure, including its established relationships with major hyperscale data-center operators, further supports its ability to have captured the displaced sales.
(4) Amount of Profit. OWS's gross margin on its competing products (the OWS-400ZR, OWS-800XR, and OWS-1600DR families) is 47.3%, as reflected in the audited financial statements prepared by Gresham & Whitfield LLP and the product-level financial data produced in discovery. This gross margin represents the incremental profit that OWS would have earned on each dollar of displaced revenue.
V.B. Market-Share Displacement Factor
46. Not every sale made by Lumicore would have been captured by OWS in a "but-for" world without infringement. The market includes other competitors, and some customers may have had reasons to prefer other suppliers. To account for this, I have applied a 38.2% market-share displacement factor, which represents the percentage of Lumicore's accused-product sales that OWS would have captured in the absence of Lumicore's infringing products.
47. The 38.2% market-share displacement factor is based on a customer overlap analysis that I performed using customer-by-customer revenue data produced by both OWS and Lumicore in discovery. This analysis shows that OWS and Lumicore compete head-to-head at 12 of the top 20 hyperscale data-center operators in the United States. These 12 overlapping customers account for a substantial majority of the total addressable market for 400G, 800G, and 1600G silicon-photonics transceivers. The 38.2% figure incorporates an adjustment for customers where OWS is not an approved vendor, where OWS does not have a competing product at the relevant data rate, or where other market factors would have directed the purchase to a third-party competitor. The methodology and detailed customer-by-customer analysis underlying the 38.2% figure are set forth in Appendix A.
V.C. Post-Notice Lost Profits Result
48. The post-notice lost profits calculation proceeds as follows:
Post-notice projected accused-product revenue × 38.2% market-share displacement × 47.3% OWS gross margin = approximately $109.2 million in post-notice lost profits.
49. This $109.2 million figure represents the single-damages lost-profit amount attributable to the period after Lumicore received actual written notice of OWS's patent rights on January 15, 2023. It is the base amount to which any enhancement multiplier would be applied.
50. For context, the total lost profits calculated over the entire infringement period (Q3 2022 through Q4 2025) are approximately $128.9 million, as set forth in my main report and Appendix A. The difference of approximately $19.7 million ($128.9 million minus $109.2 million) represents pre-notice lost profits for the period from Q3 2022 through January 14, 2023, for which enhancement is not sought. The pre-notice lost profits are included in the aggregate damages calculation but are not subject to the enhancement analysis in this Appendix.
SECTION VI: READ FACTOR ANALYSIS
VI.A. Overview.
51. In this section, I apply each of the nine Read factors to the economic evidence available in this case. For each factor, I describe the relevant evidence, analyze its economic implications, and explain how it informs the appropriate level of enhancement. I reiterate that the ultimate legal determination of willfulness is for the Court and jury; my analysis provides the economic framework for assessing the Read factors from a damages perspective.
VI.B. Factor 1: Deliberate Copying
52. The first Read factor asks whether the infringer deliberately copied the ideas or design of another. This factor is significant because deliberate copying demonstrates that the infringer recognized the value of the patented technology and consciously chose to appropriate it rather than independently develop an alternative.
53. The evidence in this case supports a finding of deliberate copying. Specifically:
(a) Review of OWS's Published Patent Applications. There is evidence that Lumicore's engineering team reviewed OWS's published patent applications during the LumiLink 400G-ZR+ design phase in 2021–2022. Melissa Chen, a former Lumicore engineer who is now employed by Veridian Photonics, Inc., is anticipated to testify that she was directed to review OWS's patent publications as part of the LumiLink design effort. Ms. Chen has been served with a third-party subpoena (dated January 22, 2025), and her deposition is pending as of the date of this Appendix.
(b) Dr. Sandra Michaud's Deposition Admission. Dr. Sandra Michaud, Lumicore's Chief Technology Officer, admitted in her November 19, 2024 deposition that she personally reviewed OWS published application No. 2018/0123456—which corresponds to the '193 Patent—during the LumiLink 400G-ZR+ design phase. This admission is particularly significant because the '193 Patent covers the polarization-diverse grating coupler architecture, which is one of the key innovative features of both the OWS and Lumicore transceiver products. Dr. Michaud's review of the published application during the product design phase supports an inference that the LumiLink design was informed by—and potentially copied from—OWS's patented technology.
(c) Benchmark Teardown Reports. The teardown reports prepared by Benchmark Semiconductor Analysis, LLC—dated December 12, 2022 (for the LumiLink 400G-ZR+), June 2023 (for the LumiLink 800G-DR8), and February 2024 (for the LumiEdge 1600G-LR)—confirmed structural similarities between the accused products and OWS's patented designs. Kevin Ng, Lead Engineer at Benchmark, identified in each teardown report specific features of the accused products that correspond to the claimed structures of the Asserted Patents, including the waveguide multiplexer architecture, the embedded micro-channel heat-sink structures, and the polarization-diverse grating coupler.
54. Economic Implication. Deliberate copying, rather than independent development, indicates that the patented technology had recognized commercial and technical value that Lumicore sought to appropriate without compensation. From an economic perspective, copying reduces the copier's research and development costs and time-to-market by leveraging the innovator's investment. This conduct is precisely the type of behavior that enhanced damages are designed to address, as it undermines the incentive structure of the patent system by allowing the infringer to free-ride on the patent holder's innovation investment. The evidence of deliberate copying supports enhancement.
VI.C. Factor 2: Investigation and Good-Faith Belief
55. The second Read factor asks whether the infringer, when it knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or not infringed. This factor is relevant because a good-faith belief in non-infringement or invalidity, supported by a competent investigation, may mitigate the egregiousness of the infringer's conduct.
56. The evidence on this factor is as follows:
(a) Lumicore's July 10, 2023 Declination Letter. In its July 10, 2023 letter formally declining to take a license, Lumicore stated that it had obtained "competent legal opinions" concluding that its products do not infringe the Asserted Patents. However, Lumicore has refused to produce these opinion letters in discovery, asserting attorney-client privilege and work-product protection. The absence of these opinion letters from the record means that neither the Court nor the jury can evaluate the substance, quality, or timing of the legal opinions upon which Lumicore claims to have relied. OWS's Motion to Compel production of the opinion letters (Docket Entry No. 40) remains pending.
(b) Raymond Bautista Deposition. Lumicore's General Counsel, Raymond Bautista, confirmed in his December 3, 2024 deposition that he received the First Notice Letter from FairPoint on or about January 15, 2023, and that he forwarded it to outside counsel within three business days. However, when questioned about the substance and timing of any opinion-of-counsel letters, Mr. Bautista refused to answer on privilege grounds. Critically, Mr. Bautista also admitted that no formal design-around analysis was commissioned before the LumiEdge 1600G-LR launch in Q4 2023. This admission is notable because the LumiEdge 1600G-LR was launched after Lumicore had received notice of all four Asserted Patents, and the absence of a design-around analysis suggests that Lumicore did not take meaningful steps to avoid the asserted claims when developing a new product.
(c) Dr. Sandra Michaud's Deposition. Lumicore's Chief Technology Officer, Dr. Sandra Michaud, could not identify specific non-infringing design alternatives during her November 19, 2024 deposition. When asked whether she had evaluated whether the features of the LumiLink and LumiEdge product lines could be modified to avoid OWS's patents, Dr. Michaud testified that she was not aware of any such evaluation and could not identify any specific design changes that would have achieved the same performance without the accused features.
57. Economic Implication. The absence of a demonstrated good-faith investigation strongly supports enhancement. An economically rational actor that receives notice of potential patent infringement and genuinely believes its products do not infringe would be expected to invest in a thorough investigation, document its conclusions, and—if necessary—commission a design-around effort to mitigate future exposure. Lumicore's decision to continue investing in and launching new accused products without apparent effort to design around the patents is inconsistent with a good-faith belief in non-infringement and instead suggests a calculated business decision to continue infringing and to deal with the consequences, if any, after the fact. The refusal to produce opinion letters compounds this conclusion, as the factfinder may draw an adverse inference from Lumicore's decision to withhold the very evidence that might support its claimed good-faith belief.
VI.D. Factor 3: Litigation Conduct
58. The third Read factor considers the infringer's behavior as a party to the litigation. This factor looks at whether the infringer has engaged in obstructive, dilatory, or bad-faith conduct during the course of the lawsuit.
59. As this litigation is ongoing, a full evaluation of Lumicore's litigation conduct is not yet possible, and I expect to update this analysis as additional events occur. However, I note the following preliminary observations:
(a) Lumicore has asserted privilege over opinion-of-counsel letters that it affirmatively referenced in its July 10, 2023 declination letter and that are directly relevant to the willfulness inquiry. The assertion of privilege over these documents, combined with Lumicore's affirmative reliance on the existence (though not the substance) of legal opinions, has required OWS to file a Motion to Compel (Docket Entry No. 40), consuming judicial resources and delaying the resolution of a central issue in the case.
(b) The parties engaged in a contested dispute regarding the scope and terms of the Protective Order governing the treatment of Lumicore's product-level financial data. While such disputes are common in patent litigation, the extent of Lumicore's resistance to disclosure has added cost and delay to the proceedings.
(c) OWS has identified deficiencies in Lumicore's preparation of its 30(b)(6) designee on Topic 14 (non-infringing alternatives). The designee was unable to provide substantive testimony on whether Lumicore had evaluated non-infringing alternatives to the accused product features, which is directly relevant to both the infringement and willfulness inquiries.
60. Economic Implication. To the extent that Lumicore's litigation conduct is found by the Court to be obstructive or indicative of bad faith, this factor would support enhancement. Litigation conduct that increases costs, delays resolution, and shields relevant evidence from scrutiny imposes economic harm on the patent holder beyond the direct damages caused by infringement. I will update this analysis as appropriate after the completion of discovery and any rulings on pending motions.
VI.E. Factor 4: Infringer's Size and Financial Condition
61. The fourth Read factor considers the infringer's size and financial condition. This factor is relevant because enhanced damages serve a deterrent function, and the appropriate level of enhancement should be calibrated to the infringer's financial resources. An enhancement that is inconsequential relative to the infringer's financial position may fail to deter future infringement.
62. Lumicore is a publicly traded company listed on the Nasdaq Stock Market. Lumicore completed its initial public offering in March 2022 at a price of $24.00 per share, with Silverstone Capital Markets LLC serving as the lead underwriter and ongoing financial advisor. At the time the Complaint was filed on April 22, 2024, Lumicore's stock was trading at approximately $37.00 per share, with approximately 91.8 million shares outstanding, giving the company a market capitalization of approximately $3.4 billion.
63. Lumicore's FY 2023 estimated revenue was approximately $312.6 million, as reported in its 10-K filing. The accused product lines represent the substantial majority of this revenue (approximately 84.7%). Lumicore's accused-product gross margins are substantial, ranging from 52.1% for the LumiLink 400G-ZR+ to 58.3% for the LumiEdge 1600G-LR, indicating that Lumicore has been earning significant profits from the sale of the accused products. Lumicore's independent auditor is Brennan Kellogg & Associates LLP (Austin office).
64. Economic Implication. Lumicore is a financially substantial entity with significant revenue, high gross margins on the accused products, and a market capitalization of approximately $3.4 billion. It is fully capable of bearing enhanced damages at any level within the statutory range. Importantly, Lumicore's financial resources are such that it could have conducted a proper investigation of OWS's patents, sought appropriate licenses, or invested in design-around efforts at any point after receiving notice. Its decision not to do so—while continuing to generate hundreds of millions of dollars in accused-product revenue—was a calculated business choice that reflects the type of deliberate, economically motivated infringement that enhanced damages are designed to address. The infringer's financial condition supports enhancement.
VI.F. Factor 5: Closeness of the Case
65. The fifth Read factor considers the closeness of the case—that is, the strength or weakness of the infringement and invalidity positions. A close case may weigh against enhancement, while a strong case for infringement and validity may support it.
66. Based on my review of the technical and legal evidence, including the expert report of Dr. Caroline Ashford and the infringement contentions served by OWS, I observe the following:
(a) OWS asserts strong literal infringement on all four Asserted Patents based on the Benchmark teardown evidence and Lumicore's internal design documents produced in discovery. The teardown reports identified specific structures in each accused product that correspond to the claimed features of the Asserted Patents.
(b) OWS also asserts infringement under the doctrine of equivalents for Claims 3 and 7 of the '193 Patent and Claim 12 of the '015 Patent. These doctrine-of-equivalents theories represent additional, rather than sole, bases for infringement and provide a backstop in the event that any of the literal infringement theories are narrowed by claim construction.
(c) Lumicore's invalidity contentions cite 23 prior-art references across the four Asserted Patents. However, Dr. Ashford's validity analysis, set forth in the appendix to her expert report, identifies distinguishing limitations in the Asserted Patents' claims that are absent from each cited prior-art reference. While I am not qualified to opine on the technical merits of the invalidity defense, I note that the breadth and number of prior-art references cited by Lumicore do not, in themselves, indicate a strong invalidity position.
67. Economic Implication. The strength of OWS's infringement case—supported by physical teardown evidence, Lumicore's own design documents, and expert analysis—combined with the breadth of Lumicore's exposure across three product lines and four patents, supports enhancement. When the infringement case is strong and the infringer's exposure is broad, the infringer's decision to continue infringing after notice appears more calculated and less excusable. The closeness of the case, viewed in the light most favorable to OWS's position, supports enhancement.
VI.G. Factor 6: Duration of Misconduct
68. The sixth Read factor considers the duration of the infringer's misconduct. A longer period of infringement, particularly after notice, weighs in favor of enhancement.
69. The post-notice infringement duration in this case is approximately 36 months, spanning from January 15, 2023 (the date of the First Notice Letter) through at least Q4 2025 (the end of the projected damages period). During this 36-month period, Lumicore not only continued to sell the LumiLink 400G-ZR+ after receiving notice, but launched two entirely new accused product lines—the LumiLink 800G-DR8 in Q1 2023 and the LumiEdge 1600G-LR in Q4 2023—despite having notice of the Asserted Patents. The total infringement period from initial product launch is approximately 41 months (Q3 2022 through the projected trial date in early 2026).
70. Economic Implication. The extended duration of post-notice infringement—spanning three full years and encompassing the launch of two additional accused product lines—indicates a deliberate, ongoing choice to infringe rather than a short-lived or inadvertent violation. Each additional quarter of post-notice infringement represents additional economic harm to OWS, including not only the direct financial harm of lost profits and eroded market share, but also the cumulative competitive harm of entrenched customer relationships and pricing pressure. The duration of misconduct strongly supports enhancement.
VI.H. Factor 7: Remedial Action
71. The seventh Read factor asks whether the infringer took any remedial action after learning of the patent holder's rights—for example, ceasing infringing sales, commissioning a design-around effort, or negotiating in good faith for a license.
72. The evidence in this case shows that Lumicore took no remedial action after receiving the First Notice Letter on January 15, 2023. Specifically:
(a) Lumicore did not cease sales of any accused product. All three accused product lines remained on the market and continued to generate revenue throughout the post-notice period.
(b) Lumicore did not undertake any design-around effort. As noted above, Raymond Bautista admitted in his December 3, 2024 deposition that no formal design-around analysis was commissioned before the LumiEdge 1600G-LR launch in Q4 2023, and no evidence has been produced indicating that any design-around effort was undertaken for the LumiLink 400G-ZR+ or LumiLink 800G-DR8 either.
(c) Lumicore launched two additional accused products—the LumiLink 800G-DR8 in Q1 2023 and the LumiEdge 1600G-LR in Q4 2023—after receiving notice. These product launches represent affirmative decisions to expand the scope of infringing activity rather than to remediate it.
(d) Lumicore has estimated that a redesign to avoid the Asserted Patents would take 18 to 24 months. While this timeline is not insignificant, it also confirms that a redesign is technically feasible—and that Lumicore chose not to initiate one despite having had more than 30 months since receiving the First Notice Letter.
73. Economic Implication. The complete absence of any remedial action, combined with the affirmative launch of additional accused products after notice, is among the most significant economic indicators of willful infringement. A rational actor that receives credible notice of patent infringement and intends to act in good faith would be expected to take at least some remedial steps—whether by initiating a design-around, entering into good-faith licensing negotiations, or escrowing anticipated royalties. Lumicore did none of these things. Instead, it maximized its infringing revenue at OWS's expense, generating hundreds of millions of dollars from the accused products during the post-notice period. The absence of remedial action strongly supports enhancement.
VI.I. Factor 8: Motivation for Harm
74. The eighth Read factor considers the infringer's motivation for harm. This factor examines whether the infringer was motivated by a desire to gain competitive advantage at the patent holder's expense, or whether the infringement was incidental to some other business objective.
75. OWS and Lumicore are direct competitors in the silicon-photonics transceiver market for hyperscale data centers. OWS is the third-largest U.S. supplier in this market, with established customer relationships with the leading hyperscale data-center operators. Lumicore is a fast-growing market entrant that entered the commercial silicon-photonics transceiver market in Q3 2022 with the LumiLink 400G-ZR+. The accused products compete directly with OWS's OWS-400ZR, OWS-800XR, and OWS-1600DR product families.
76. The competitive dynamics between OWS and Lumicore are reflected in several key data points:
(a) Customer Overlap. Seven major hyperscale data-center operators purchase silicon-photonics transceiver products from both OWS and Lumicore, creating direct competitive overlap. The customer overlap analysis described in Section V.B above confirms that OWS and Lumicore compete head-to-head at 12 of the top 20 hyperscale data-center operators for various product qualifications and purchase orders.
(b) Price Erosion. The average selling price ("ASP") of 400G-ZR silicon-photonics transceivers declined by 18.7% from Q3 2022 (when Lumicore entered the market with the LumiLink 400G-ZR+) to Q4 2023. While ASP declines are common in the semiconductor industry due to technology maturation and volume scaling, the magnitude and timing of this decline are attributable in part to Lumicore's entry into the market with infringing products that competed aggressively on price. This price erosion has directly harmed OWS's revenue and profitability on its competing products.
(c) Loss of Design-In Opportunities. OWS has experienced the loss of design-in opportunities at certain hyperscale customers as a result of Lumicore's entry into the market. A "design-in" is a customer's formal qualification and selection of a particular transceiver product for use in its data-center infrastructure. Once a competing product is designed in, the customer's switching costs increase, making it more difficult for OWS to recapture the business in subsequent procurement cycles. The loss of design-in opportunities represents not only immediate revenue loss but also long-term competitive harm.
77. Economic Implication. The competitive dynamics in this case indicate that Lumicore's infringement was motivated by market-share gains that directly harmed OWS. Lumicore's accused products enabled it to compete for and win business that would otherwise have gone to OWS, while simultaneously driving down prices across the market. The infringement was not incidental or unrelated to Lumicore's competitive objectives; it was central to Lumicore's market-entry strategy. This competitive motivation supports enhancement.
VI.J. Factor 9: Concealment of Misconduct
78. The ninth Read factor asks whether the infringer attempted to conceal its misconduct. Concealment of infringement is an aggravating factor that supports enhancement.
79. This factor is to be further developed as discovery progresses; however, I note the following preliminary observations:
(a) Lumicore's refusal to produce the opinion-of-counsel letters referenced in its July 10, 2023 declination letter may support an inference of concealment. By affirmatively invoking the existence of "competent legal opinions" while simultaneously refusing to disclose their substance, Lumicore has created a situation in which it benefits from the implication of good-faith reliance on legal advice while shielding the actual content of that advice from scrutiny. Should the Court grant OWS's Motion to Compel (Docket Entry No. 40), the substance of these opinion letters may shed significant light on this factor.
(b) Raymond Bautista's assertion of privilege on substantive questions regarding Lumicore's internal response to the notice letters similarly limits the available evidence on this factor. To the extent that Lumicore's internal deliberations reveal awareness of infringement risk that was not communicated externally or acted upon, such evidence would support a finding of concealment.
(c) The deficiencies in Lumicore's 30(b)(6) designee preparation on Topic 14 (non-infringing alternatives) raise additional questions about whether Lumicore has been forthcoming about its evaluation of—or failure to evaluate—design-around options.
80. Economic Implication. To the extent concealment is established, it would indicate that Lumicore was aware of the strength of OWS's infringement case and sought to minimize the visibility of its decision to continue infringing. Concealment is inconsistent with good-faith conduct and supports enhancement. I reserve the right to update this analysis based on the outcome of OWS's pending Motion to Compel and any additional discovery.
SECTION VII: ENHANCED DAMAGES SCENARIOS UNDER VARIOUS MULTIPLIERS
VII.A. Enhancement Base
81. The post-notice lost profits of approximately $109.2 million serve as the base for the enhancement calculation. This figure, as derived in Section V above, represents the single-damages lost-profit amount attributable to the period after Lumicore received actual written notice of OWS's patent rights on January 15, 2023.
82. I note that enhancement under 35 U.S.C. § 284 is additive—that is, the multiplier applies to the single-damages amount to produce the total enhanced amount, and the "enhancement" itself is the difference between the total enhanced amount and the single-damages base. For example, a 2× enhancement means that the total enhanced amount is $109.2 million × 2 = $218.4 million, of which $109.2 million is the single-damages base and $109.2 million is the enhancement above single damages.
83. I further note that I have applied the enhancement multiplier only to the post-notice lost profits and not to the pre-notice lost profits or the reasonable-royalty component of damages. This approach is conservative and appropriate because enhancement is intended to address the enhanced culpability associated with continued infringement after actual notice, and it would be inconsistent with this rationale to enhance damages attributable to a period when the infringer had not yet been placed on notice.
VII.B. Scenario Analysis
84. The following table presents the enhanced damages calculation under various multiplier scenarios:
85. As reflected in the table above, the range of possible enhancements above single damages spans from $0 (no enhancement) to $218.4 million (statutory maximum at 3.0×). The selection of the appropriate multiplier within this range is committed to the Court's discretion, informed by the jury's willfulness finding and the Court's assessment of the Read factors.
VII.C. Recommended Enhancement Level
86. Based on my analysis of the Read factors set forth in Section VI, and in particular the evidence of:
(a) Deliberate copying (Factor 1), as demonstrated by Lumicore's review of OWS's published patent applications during the product design phase and the structural similarities confirmed by the Benchmark teardown reports;
(b) Failure to conduct a good-faith investigation (Factor 2), as demonstrated by the absence of produced opinion-of-counsel letters, the failure to commission a design-around analysis before launching the LumiEdge 1600G-LR, and the inability of Lumicore's CTO to identify non-infringing alternatives;
(c) Extended duration of post-notice infringement (Factor 6), spanning approximately 36 months and encompassing the launch of two additional accused product lines;
(d) Complete absence of remedial action (Factor 7), with no evidence of design-around efforts, sales cessation, or good-faith licensing negotiations; and
(e) Competitive motivation for harm (Factor 8), as demonstrated by the direct competitive overlap between OWS and Lumicore, the 18.7% price erosion, and the loss of design-in opportunities;
I opine that a multiplier of at least 2.0× on the post-notice lost profits is economically justified.
87. At a 2.0× enhancement, the enhancement amount above single damages is approximately $109.2 million, and the total post-notice lost profits with enhancement is approximately $218.4 million. This level of enhancement reflects the seriousness of Lumicore's post-notice conduct, its deliberate choice to continue and expand its infringing activity despite actual knowledge of OWS's patent rights, and the substantial economic harm that this conduct has caused to OWS.
88. I note that the 2.0× multiplier is within the mid-range of available enhancements and is well below the statutory maximum of 3.0×. A 2.0× multiplier is consistent with the enhancement levels that co