UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS MARSHALL DIVISION
OPTIWAVE SEMICONDUCTOR CORP.,
Plaintiff,
v.
LUMICORE TECHNOLOGIES, INC.,
Defendant.
Case No. 2:24-cv-00319-JRG
Judge James R. Gilstrap
PLAINTIFF OPTIWAVE SEMICONDUCTOR CORP.'S OPPOSITION TO DEFENDANT LUMICORE TECHNOLOGIES, INC.'S MOTION FOR PROTECTIVE ORDER REGARDING FINANCIAL DATA
TABLE OF AUTHORITIES
Cases.
Statutes.
Rules.
Other Authorities.
I. INTRODUCTION
Defendant Lumicore Technologies, Inc. ("Lumicore") asks this Court for a protective order that would shield from discovery product-level revenue, cost-of-goods-sold, and gross-margin data for its three accused product lines — the LumiLink 400G-ZR+, the LumiLink 800G-DR8, and the LumiEdge 1600G-LR. Lumicore's motion (D.E. 42) should be denied in all material respects. The data that Lumicore seeks to withhold is not merely relevant to Plaintiff Optiwave Semiconductor Corp.'s ("OWS" or "Plaintiff") damages case — it is indispensable to it.
OWS filed this action on April 22, 2024, asserting infringement of four U.S. utility patents: U.S. Patent Nos. 10,234,847 (the "'847 Patent"), 10,891,193 (the "'193 Patent"), 9,678,562 (the "'562 Patent"), and 11,402,015 (the "'015 Patent"). These patents cover core optical transceiver and waveguide multiplexing technologies that are practiced in each of Lumicore's three accused product families. OWS seeks approximately $210 million in damages — comprising lost profits under the four-factor Panduit framework, reasonable royalties under the fifteen-factor Georgia-Pacific analysis, and enhanced damages for willful infringement under 35 U.S.C. § 284.
Every one of OWS's damages theories requires granular, product-level financial data from the accused infringer. The Panduit lost-profits analysis requires OWS to quantify the profits it would have earned "but for" the infringement — a calculation that depends on knowing which Lumicore sales displaced which OWS sales, in what volumes, at what prices, and to which customers. The Georgia-Pacific reasonable-royalty analysis requires consideration of the accused infringer's anticipated profits, the commercial success of the accused products, and the portion of realizable profit attributable to the patented invention — none of which can be assessed from aggregated company-wide figures. And any assessment of enhanced damages for willful infringement requires isolating post-notice accused-product sales, which is impossible without product-level revenue data broken down by time period.
Lumicore's motion is not a genuine effort to protect trade secrets or to prevent competitive harm. It is an effort to hobble OWS's damages case by depriving OWS's damages expert — Dr. Lawrence Keating of Meridian Economic Consulting Group, LLC — of the very information he needs to calculate damages. The data that Lumicore seeks to withhold is plainly relevant under Fed. R. Civ. P. 26(b)(1), proportional to the needs of this $210 million case, and well within the scope of discovery routinely ordered in patent infringement litigation in this District and throughout the federal courts.
Critically, adequate protections already exist to address any legitimate confidentiality concern that Lumicore may have. The parties have jointly submitted a Proposed Stipulated Protective Order (D.E. 30, filed August 19, 2024) establishing a three-tier confidentiality framework, including a "Highly Confidential — Attorneys' Eyes Only" ("AEO") tier that restricts access to outside counsel, retained experts, and the Court. OWS has affirmatively agreed that Lumicore's product-level financial data should be designated at the AEO tier. Under this framework, no OWS in-house personnel — not its CEO, not its CFO, not its General Counsel — would have access to Lumicore's product-level financial data. The risk of competitive misuse is nil.
What Lumicore proposes instead — production of only aggregated company-wide figures as reported in its public 10-K filing with the Securities and Exchange Commission — is no substitute at all. Aggregated figures commingle accused and non-accused product revenues and costs, making it impossible for Dr. Keating to isolate the financial performance of the accused products. This is precisely the type of obfuscation that courts have repeatedly rejected in patent damages discovery.
OWS respectfully requests that the Court deny Lumicore's motion to the extent it seeks to withhold product-level financial data, grant it only to the extent it seeks AEO designation for such data, and order Lumicore to produce the requested information within a timeframe consistent with the existing discovery schedule.
II. FACTUAL BACKGROUND
A. The Parties and the Litigation
Plaintiff Optiwave Semiconductor Corp. ("OWS") is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 4810 Bayside Technology Parkway, Suite 300, Santa Clara, California 95054. OWS is a fabless semiconductor company specializing in the design and development of silicon photonics chipsets for data-center optical interconnects. OWS's products are used by the world's largest hyperscale cloud operators and telecommunications providers to transmit data at high speeds over optical fiber networks. In fiscal year 2023, OWS generated revenue of approximately $487.3 million. OWS maintains a robust intellectual property portfolio consisting of 142 issued U.S. patents and 58 pending U.S. patent applications, the majority of which relate to silicon photonics, optical transceiver design, waveguide multiplexing, and related technologies.
Defendant Lumicore Technologies, Inc. ("Lumicore") is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 9200 Spectrum Boulevard, Building C, Austin, Texas 78759. Lumicore is a publicly traded company, having completed an initial public offering on the Nasdaq Stock Market in March 2022 at an offering price of $24.00 per share. At the time this action was filed in April 2024, Lumicore's common stock was trading at approximately $37.00 per share, with approximately 91.8 million shares outstanding, yielding a market capitalization of approximately $3.4 billion. Lumicore reported estimated fiscal year 2023 revenue of approximately $312.6 million, derived primarily from the sale of optical transceiver modules for data-center and telecommunications applications. Lumicore competes directly with OWS in the silicon photonics transceiver market.
OWS filed its Original Complaint on April 22, 2024 (D.E. 1), asserting claims for infringement of four U.S. utility patents under 35 U.S.C. § 271(a). The Asserted Patents are:
(a) U.S. Patent No. 10,234,847 ("the '847 Patent"), titled "Multi-Channel Optical Transceiver with Integrated Wavelength Division Multiplexing," issued on March 19, 2019;
(b) U.S. Patent No. 10,891,193 ("the '193 Patent"), titled "Silicon Photonic Waveguide Structure for High-Density Optical Interconnection," issued on January 12, 2021;
(c) U.S. Patent No. 9,678,562 ("the '562 Patent"), titled "Modular Optical Engine Architecture for Pluggable Transceiver Applications," issued on June 13, 2017; and
(d) U.S. Patent No. 11,402,015 ("the '015 Patent"), titled "Coherent Detection System with Low-Power Digital Signal Processing for Data Center Links," issued on August 2, 2022.
These patents collectively cover fundamental aspects of the optical transceiver and waveguide multiplexing technologies that Lumicore incorporates in its accused product lines. OWS asserts these patents against three specific Lumicore product families, as described below.
B. The Accused Products and Their Revenue
OWS accuses three Lumicore product lines of infringing one or more of the Asserted Patents:
LumiLink 400G-ZR+. Lumicore launched the LumiLink 400G-ZR+ coherent optical transceiver module in the third quarter of 2022. This product is designed for data-center interconnect ("DCI") applications operating at 400 gigabits per second over single-mode fiber. OWS accuses the LumiLink 400G-ZR+ of infringing claims of the '847 Patent, the '193 Patent, and the '562 Patent. According to Lumicore's own public SEC filings, the LumiLink 400G-ZR+ generated fiscal year 2023 revenue of approximately $94.8 million.
LumiLink 800G-DR8. Lumicore launched the LumiLink 800G-DR8 multimode transceiver module in the first quarter of 2023. This product targets intra-data-center applications requiring 800 gigabit-per-second bandwidth using eight parallel lanes of 100G-per-lane PAM4 signaling over multimode fiber. OWS accuses the LumiLink 800G-DR8 of infringing claims of all four Asserted Patents — the '847 Patent, the '193 Patent, the '562 Patent, and the '015 Patent. The LumiLink 800G-DR8 is Lumicore's highest-revenue product, generating fiscal year 2023 revenue of approximately $128.4 million.
LumiEdge 1600G-LR. Lumicore launched the LumiEdge 1600G-LR long-reach transceiver module in the fourth quarter of 2023. This next-generation product is designed for extended-reach data-center fabric applications at 1.6 terabits per second. OWS accuses the LumiEdge 1600G-LR of infringing claims of the '193 Patent and the '015 Patent. Although the LumiEdge 1600G-LR was launched relatively recently, it generated fiscal year 2023 revenue of approximately $41.7 million in its first partial quarter of sales, and public analyst reports indicate that it is ramping rapidly.
In the aggregate, the three accused product lines generated total fiscal year 2023 revenue of approximately $264.9 million — representing approximately 84.7% of Lumicore's total company-wide revenue of $312.6 million. Over the full infringement period from the third quarter of 2022 through the first quarter of 2024, total accused-product revenue is approximately $378.2 million, according to the preliminary analysis of OWS's damages expert, Dr. Lawrence Keating of Meridian Economic Consulting Group, LLC. Projecting forward through the anticipated trial date in February 2026, Dr. Keating estimates that total accused-product revenue from Q3 2022 through Q4 2025 will reach approximately $714.6 million.
C. OWS's Damages Theories
OWS seeks damages of approximately $210 million, as set forth in its Complaint (D.E. 1) and as further developed through the preliminary analysis of Dr. Keating. OWS pursues three complementary damages theories:
Theory 1 — Lost Profits (Panduit). OWS claims that it lost sales of its competing OWS-400ZR and OWS-800XR transceiver modules as a direct result of Lumicore's infringement. OWS's gross margin on these competing products is 47.3%. Based on an analysis of customer overlap — OWS and Lumicore compete head-to-head at 12 of the top 20 hyperscale data-center operators — Dr. Keating has preliminarily estimated a market-share displacement rate of 38.2%. Applying this displacement analysis to the relevant accused-product sales, Dr. Keating estimates lost-profit damages of approximately $128.9 million.
Theory 2 — Reasonable Royalty (Georgia-Pacific). For those accused-product sales where OWS cannot demonstrate lost profits — for example, sales to customers that OWS did not serve or could not have served — OWS seeks a reasonable royalty. Based on a hypothetical negotiation analysis applying the fifteen Georgia-Pacific factors, and supported by comparable license agreements, OWS proposes a reasonable royalty rate of 8.5% of accused-product net sales. Dr. Keating's preliminary estimate of reasonable-royalty damages is approximately $37.5 million.
Theory 3 — Enhanced Damages for Willful Infringement. OWS further seeks enhanced damages under 35 U.S.C. § 284 based on Lumicore's willful infringement. On January 15, 2023, OWS's licensing agent, FairPoint IP Advisors LLC, sent a detailed notice letter to Lumicore identifying the '847 Patent, the '193 Patent, and the '562 Patent and explaining that the LumiLink 400G-ZR+ and the then-forthcoming LumiLink 800G-DR8 appeared to infringe those patents. On May 15, 2023, FairPoint sent a supplemental notice letter adding the '015 Patent and identifying the LumiEdge 1600G-LR as an additional accused product. Lumicore declined to take a license and continued its infringing activities. OWS estimates post-notice lost profits of approximately $109.2 million, upon which it will seek enhancement.
In the aggregate, OWS's damages demand is approximately $210 million, as pled in the Complaint. Each of these theories requires product-level revenue, cost, and margin data from Lumicore to be properly calculated and supported at trial.
D. The discovery Requests at Issue
On August 26, 2024, OWS served its First Set of Requests for Production of Documents to Lumicore, comprising 85 requests for production pursuant to Federal Rule of Civil Procedure 34 and the Local Rules of this Court. Among those requests, OWS sought documents reflecting or relating to Lumicore's financial performance for the accused products, including but not limited to: product-level revenue; unit sales volumes; cost of goods sold; gross margins; average selling prices; customer-by-customer sales data; pricing agreements and discount schedules; financial projections and forecasts; and any internal analyses of the profitability of the accused product lines.
On September 20, 2024, Lumicore served its Responses and Objections to OWS's First Set of Requests for Production. With respect to the financial data requests, Lumicore asserted blanket objections on the grounds that the requested information was "competitively sensitive," "proprietary," and "constitutes trade secrets," and stated that it would produce only aggregated company-wide revenue and cost figures as reported in its publicly filed Annual Report on Form 10-K with the Securities and Exchange Commission.
On or about September 20, 2024, counsel for the parties met and conferred regarding Lumicore's objections. OWS proposed that Lumicore produce the requested product-level financial data subject to designation as "Highly Confidential — Attorneys' Eyes Only" under the Proposed Stipulated Protective Order. Lumicore rejected this proposal, maintaining that even AEO designation was insufficient to protect against competitive harm. A follow-up meet-and-confer took place on or about October 1, 2024, but the parties remained at an impasse. On October 3, 2024, Lumicore filed its Motion for Protective Order (D.E. 42), seeking to withhold product-level financial data from discovery entirely, or in the alternative, to produce only aggregated company-wide figures.
E. The Proposed Protective Order Framework
On August 19, 2024, the parties jointly submitted a Proposed Stipulated Protective Order to the Court (D.E. 30). The proposed order establishes a three-tier confidentiality framework governing the treatment of confidential information produced in discovery:
Tier 1: "Confidential." This tier covers general business information, including non-public business correspondence, technical documentation, and similar materials. Documents designated as "Confidential" may be viewed by outside counsel for both parties, in-house counsel, retained experts and consultants, and the Court.
Tier 2: "Highly Confidential — Attorneys' Eyes Only" ("AEO"). This tier covers sensitive competitive, financial, and strategic information. Documents designated as AEO may be viewed only by outside counsel for the receiving party, retained experts and consultants who have signed the appropriate undertaking, and the Court and court personnel. Critically, in-house counsel, business employees, and corporate officers of the receiving party are excluded from access to AEO materials.
Tier 3: "Highly Confidential — Source Code." This tier covers source code, firmware, FPGA design files, and equivalent highly sensitive technical materials. Access to Tier 3 materials is limited to outside counsel and a single designated technical expert, and review must occur at a designated secure facility under specified conditions.
OWS has expressly and repeatedly agreed that Lumicore's product-level financial data — including revenue, cost of goods sold, gross margins, average selling prices, and customer-by-customer sales breakdowns — may be designated at the AEO tier. Under this designation, the data would be accessible only to OWS's outside counsel at Calderwood & Harkness LLP (Alan Ngo, Marcus Delgado, Wendy Schultz, and Omar Siddiqui) and local counsel at Whitmore & Callahan LLP (Jim Callahan), OWS's retained damages expert (Dr. Lawrence Keating of Meridian Economic Consulting Group, LLC), and the Court and its personnel. No OWS in-house personnel — including Rebecca Tanaka (General Counsel), David Leitner (Chief Financial Officer), and Dr. Priya Ramaswamy (Chief Executive Officer) — would have access to the data.
This framework provides robust and well-established protections against any risk of competitive misuse.
F. The Court's Scheduling Order
On August 12, 2024, this Court entered its Scheduling Order (D.E. 27), establishing the following relevant deadlines:
• Fact discovery closes: May 1, 2025
• Markman hearing: March 14, 2025
• Plaintiff's opening expert reports due: June 15, 2025
• Defendant's responsive expert reports due: August 15, 2025
• Expert discovery closes: September 30, 2025
• Dispositive motions deadline: October 31, 2025
• Trial: February 2, 2026
Dr. Keating must have sufficient time to receive, process, analyze, and incorporate Lumicore's product-level financial data into his expert report, which is due June 15, 2025. Given the complexity of the damages analysis and the volume of financial data involved, Dr. Keating will require a minimum of several weeks of working time with the data. Any further delay in Lumicore's production of this data will jeopardize Dr. Keating's ability to prepare a compliant and supportable expert report, and may ultimately prejudice OWS's prosecution of its damages claims at trial.
III. LEGAL STANDARD
A. Scope of discovery Under Fed. R. Civ. P. 26(b)(1)
Federal Rule of Civil Procedure 26(b)(1) provides that "[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case." The Rule instructs courts to consider the following factors in assessing proportionality: (1) the importance of the issues at stake in the action; (2) the amount in controversy; (3) the parties' relative access to relevant information; (4) the parties' resources; (5) the importance of the discovery in resolving the issues; and (6) whether the burden or expense of the proposed discovery outweighs its likely benefit. Fed. R. Civ. P. 26(b)(1).
Relevance under Rule 26(b)(1) is construed broadly. Information is relevant if it has any tendency to make a fact of consequence more or less probable than it would be without the information. See 8 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2035 (3d ed. 2020). Discovery is not limited to information that would be admissible at trial; rather, it encompasses any information that "appears reasonably calculated to lead to the discovery of admissible evidence." Nidec Motor Corp. v. Zhongshan Broad-Ocean Motor Co., 868 F.3d 1013, 1017 (Fed. Cir. 2017).
B. Protective Orders Under Fed. R. Civ. P. 26(c)(1)
Federal Rule of Civil Procedure 26(c)(1) provides that a court may, "for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense," including by specifying the terms on which discovery may be had. The burden is on the party seeking the protective order — here, Lumicore — to demonstrate "good cause" for each specific category of information it seeks to protect. Glenayre Elecs., Inc. v. Jackson, 443 F.3d 851, 858 (Fed. Cir. 2006).
"Good cause" requires more than conclusory or speculative assertions of harm. The movant must make "a particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements." Id. (internal quotation marks omitted). The movant must show that disclosure will result in a "clearly defined and serious injury." Id. Broad, unsubstantiated claims of competitive harm do not suffice. Riverbed Tech., Inc. v. Silver Peak Sys., Inc., No. 5:13-cv-05765-PSG, 2015 WL 5728605, at *2 (N.D. Cal. Sept. 30, 2015).
Importantly, where confidentiality concerns can be addressed through a less restrictive alternative — such as designation of information as "Attorneys' Eyes Only" under a protective order — complete withholding of relevant information from discovery is not warranted. Courts consistently hold that the availability of an AEO designation undercuts claims of good cause for outright non-disclosure. See Panoptis Patent Mgmt., LLC v. Ericsson Inc., No. 2:19-cv-00363-JRG, 2020 WL 7364674, at *3 (E.D. Tex. Dec. 15, 2020).
C. Financial discovery in Patent Cases
Damages are an essential element of a patent infringement claim. Under 35 U.S.C. § 284, "[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty." A patentee is entitled to prove and recover either lost profits or a reasonable royalty, or both where applicable to different subsets of infringing sales.
Both the Panduit lost-profits analysis and the Georgia-Pacific reasonable-royalty analysis require detailed financial data from the accused infringer, including product-level revenue, costs, margins, and pricing information. See Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978) (setting forth four-factor test for lost profits); Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) (setting forth fifteen-factor framework for reasonable royalty). Courts in this District and throughout the federal system have repeatedly held that accused infringers cannot shield product-level financial data from discovery in patent cases where damages are at issue. See Northgate & Co. Elecs. Co. v. Netlist, Inc., No. 2:22-cv-00298-JRG, 2023 WL 4489023, at 4 (E.D. Tex. July 12, 2023) (ordering production of product-level financial data subject to AEO protections); Panoptis, 2020 WL 7364674, at 3–4 (same); Commonwealth Sci. & Indus. Research Org. v. Cisco Sys., Inc., No. 6:11-cv-343, 2013 WL 2146773, at 3 (E.D. Tex. 2013) (same). The existence of a protective order with an AEO tier is routinely deemed sufficient to address competitive sensitivity concerns associated with financial data. In re Valpren Licensing GmbH & Co. KG Litig.*, 778 F.3d 1255, 1263 (Fed. Cir. 2015).
IV. ARGUMENT
A. Lumicore's Product-Level Financial Data Is Directly Relevant and Essential to OWS's Damages Case
The financial data that Lumicore seeks to withhold — product-level revenue, cost of goods sold, gross margins, average selling prices, and customer-by-customer sales breakdowns for the LumiLink 400G-ZR+, LumiLink 800G-DR8, and LumiEdge 1600G-LR — sits at the heart of OWS's damages case. Without this data, OWS's damages expert, Dr. Keating, cannot perform the analyses required to support any of OWS's three damages theories. Lumicore's effort to withhold this information is tantamount to asking the Court to preclude OWS from proving damages at all.
As set forth below, each of OWS's damages theories depends on product-level financial data from Lumicore, and each would be fatally undermined if OWS were limited to the aggregated company-wide figures that Lumicore proposes to produce.
1. Lost-Profits Analysis (Panduit) Requires Product-Level Data. Under the Panduit framework, a patentee seeking lost profits must demonstrate: (1) demand for the patented product; (2) the absence of acceptable non-infringing substitutes; (3) the patentee's manufacturing and marketing capability to exploit the demand; and (4) the amount of profit the patentee would have made. Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978). The fourth factor — the amount of profit — is the factor most directly implicated by Lumicore's motion, but it is by no means the only one that depends on product-level data.
To calculate the profits that OWS would have earned "but for" Lumicore's infringement, Dr. Keating must determine which Lumicore sales OWS would have captured in the absence of infringement, and then apply OWS's margin to those displaced sales. This calculation requires knowing, at a minimum: (a) Lumicore's unit sales volume for each accused product, by quarter; (b) Lumicore's revenue for each accused product, by quarter and by customer; and (c) the identity of Lumicore's customers and the volume of sales to each customer.
OWS competes head-to-head with Lumicore in the silicon photonics transceiver market. OWS's OWS-400ZR module competes directly with the LumiLink 400G-ZR+, and OWS's OWS-800XR module competes directly with the LumiLink 800G-DR8. OWS's gross margin on these competing products is 47.3%. Dr. Keating's preliminary analysis estimates a market-share displacement rate of 38.2%, based on the fact that OWS and Lumicore compete at 12 of the top 20 hyperscale data-center operators. See Whitserve LLC v. Computer Packages, Inc., 694 F.3d 10, 28 (Fed. Cir. 2012) (patentee must establish that it would have made the sales that the infringer actually made).
But this 38.2% displacement figure is preliminary. It can only be validated and refined through examination of Lumicore's customer-by-customer revenue data. For each Lumicore customer, Dr. Keating must assess whether OWS had (or could have had) a competing relationship with that customer. Where OWS and Lumicore competed for the same customer's business, a lost-profit claim is appropriate. Where OWS did not compete for the customer's business — for example, because the customer was in a geographic market or product segment that OWS did not serve — only a reasonable royalty may be recovered. See Bramwell Partners LLC v. VLSI Tech. LLC, No. 6:21-cv-00057-ADA, 2022 WL 2866037, at *5 (W.D. Tex. July 21, 2022) (distinguishing between lost-profit and reasonable-royalty sales based on customer overlap).
Without Lumicore's product-level and customer-level financial data, Dr. Keating cannot draw this essential line between lost-profit sales and reasonable-royalty sales. Aggregated company-wide figures tell Dr. Keating nothing about which products were sold, to which customers, in what volumes, and at what prices. The entire Panduit analysis would collapse without this information.
2. Reasonable-Royalty Analysis (Georgia-Pacific) Requires Product-Level Data. The Georgia-Pacific framework requires consideration of fifteen factors in the context of a hypothetical negotiation between a willing licensor and a willing licensee. Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). Many of these factors depend directly on the accused infringer's product-level financial data:
• Factor 2 — "The rates paid by the licensee for the use of other patents comparable to the patent in suit" — requires analysis of Lumicore's licensing history and the financial context in which prior licenses were negotiated, including Lumicore's anticipated revenues from the accused products.
• Factor 8 — "The established profitability of the product made under the patent; its commercial success; and its current popularity" — requires product-level revenue and profitability data for the accused products. See VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326–27 (Fed. Cir. 2014).
• Factor 11 — "The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use" — requires data on the volume and revenue of accused-product sales.
• Factor 13 — "The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements" — requires product-level cost and margin data to determine the total realizable profit from each accused product and to apportion that profit between the patented and unpatented elements.
The hypothetical negotiation date for this case is the second quarter of 2022, just before the launch of the first accused product (the LumiLink 400G-ZR+ in Q3 2022). Even in reconstructing the hypothetical licensee's anticipated financial projections as of that date, it is well established that courts and experts may — and frequently do — reference the accused infringer's actual financial outcomes to inform the analysis. See Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1325 (Fed. Cir. 2009) ("the hypothetical negotiation analysis 'attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began'"). Without Lumicore's product-level revenue and margin data, Dr. Keating cannot reconstruct the financial expectations that would have informed the hypothetical negotiation.
OWS proposes a reasonable royalty rate of 8.5% of accused-product net sales, supported by the following comparable licenses:
• OWS-Terralink Semiconductor License Agreement (executed 2020): 6.5% running royalty on net sales of licensed products.
• OWS-NovaWave Corp. License Agreement (executed 2021): 9.0% running royalty on net sales of licensed products.
• OWS-Helix Integrated Photonics License Agreement (executed 2022): 7.75% running royalty on net sales of licensed products.
• Stratos Photonics v. ArcLight Systems (E.D. Tex. 2021): jury verdict of 8.0% reasonable royalty.
• Coreline Technologies v. Prisma Semiconductor (N.D. Cal. 2022): 10.2% reasonable royalty found by the court.
To apply this 8.5% royalty rate, Dr. Keating must first determine the royalty base — i.e., the net sales of each accused product. See Northgate & Co. Elecs. Co. v. Netlist, Inc., 2023 WL 4489023, at *4 (E.D. Tex. July 12, 2023) (product-level revenue data required to establish royalty base). Aggregated company-wide revenue figures cannot serve this purpose, as they include revenue from non-accused products and services that are not part of the royalty base.
3. Willful Infringement / Enhanced Damages Analysis Requires Product-Level Data. OWS seeks enhanced damages under 35 U.S.C. § 284 based on Lumicore's willful infringement following receipt of notice. The Supreme Court held in Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93, 103 (2016), that enhanced damages are available in "egregious cases of culpable behavior," which may include continued infringement after notice. Here, Lumicore received detailed notice of OWS's patents and infringement allegations through FairPoint's January 15, 2023 letter (identifying the '847, '193, and '562 Patents) and FairPoint's May 15, 2023 supplemental letter (adding the '015 Patent). Despite receiving this notice, Lumicore continued to manufacture, sell, and offer for sale all three accused product lines.
Calculating post-notice damages — the base upon which any enhancement would be applied — requires identifying Lumicore's accused-product revenue during the post-notice period (January 15, 2023 through trial). This cannot be done with aggregated company-wide figures. Dr. Keating must have quarterly, product-level revenue data to isolate the post-notice sales of each accused product. His preliminary estimate of post-notice lost profits is approximately $109.2 million, but this figure is based on publicly available information and must be validated and refined using Lumicore's actual product-level financial records.
4. Apportionment and SSPPU/EMVR Analysis Requires Product-Level Data. To the extent Lumicore challenges OWS's damages theories on apportionment grounds — as accused infringers frequently do in patent cases — OWS must have access to Lumicore's product-level cost data, including bill-of-materials information, component costs, and margin data. Under the Federal Circuit's apportionment jurisprudence, a damages award must be based on the value attributable to the patented features, as distinct from the value attributable to unpatented features. See LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012); Uniloc USA, Inc. v. Kestrel Partners LLC, 632 F.3d 1292, 1318 (Fed. Cir. 2011).
OWS contends that the entire-market-value rule ("EMVR") applies here because the patented silicon photonics chipset is the core component that drives demand for each accused transceiver module. Alternatively, OWS is prepared to apply the smallest salable patent-practicing unit ("SSPPU") framework. Under either approach, however, Dr. Keating must analyze Lumicore's product-level cost structure — including the relative costs of the silicon photonics chipset, the optical subassembly, the printed circuit board, the housing, and other module components — to demonstrate the relationship between the patented features and the overall product value. See Lucent Techs., 580 F.3d at 1337–39.
Aggregated company-wide cost data is useless for this purpose. The analysis must be conducted at the product level, and indeed at the component level within each product.
B. Lumicore Has Not Met Its Burden of Showing Good Cause for Withholding the Data Entirely
Lumicore bears the burden of establishing "good cause" under Fed. R. Civ. P. 26(c)(1) for the protective order it seeks. Lumicore has failed to carry that burden. Its motion rests on conclusory assertions of competitive harm, proposes an inadequate alternative, and ignores the availability of robust confidentiality protections that fully address any legitimate concern.
1. Lumicore's Assertions of Competitive Harm Are Conclusory. Lumicore's motion relies on generalized assertions that its product-level financial data is "competitively sensitive" and that disclosure, even under the terms of a protective order, would cause "irreparable competitive harm." These assertions are precisely the type of "stereotyped and conclusory statements" that courts have repeatedly held insufficient to establish good cause for a protective order. See Glenayre Elecs., 443 F.3d at 858; Stamps.com, Inc. v. Endicia, Inc., No. SACV 06-0781 JVS (MLGx), 2008 WL 11338246, at *3 (C.D. Cal. Mar. 19, 2008) ("The party seeking a protective order must show specific prejudice or harm rather than broad allegations of injury.").
Lumicore has not identified a single specific competitive injury that would result from disclosure of its product-level financial data to OWS's outside counsel and expert under the AEO tier. Lumicore does not explain who would misuse the data, how it would be misused, or what concrete harm would result. Its assertions of "irreparable competitive harm" are entirely speculative and unsupported by any declaration or evidentiary showing.
Moreover, Lumicore is a publicly traded company listed on the Nasdaq Stock Market with a market capitalization of approximately $3.4 billion. As a public company, Lumicore already discloses substantial financial information in its annual and quarterly filings with the SEC. Indeed, Lumicore's own SEC filings contain segment-level revenue disclosures that publicly reveal the fiscal year 2023 revenue figures for each accused product line: $94.8 million for the LumiLink 400G-ZR+, $128.4 million for the LumiLink 800G-DR8, and $41.7 million for the LumiEdge 1600G-LR. See Northpoint Group Labs., Inc. v. 10X Genomics, Inc., 380 F. Supp. 3d 311, 318 (D. Del. 2019) (noting that public company's claim of competitive harm was undermined by its own public financial disclosures).
The incremental sensitivity of cost-of-goods-sold and margin data, while acknowledged, is adequately addressed by the AEO protections that OWS has affirmatively accepted. No OWS business employee or in-house counsel would see the data. The risk of competitive misuse is not merely low — it is nonexistent under the proposed framework.
2. Lumicore's Proposed Alternative — Aggregated Company-Wide Data — Is Inadequate. As an alternative to producing product-level financial data, Lumicore proposes that OWS accept only aggregated company-wide revenue and cost figures as reported in Lumicore's public 10-K filing. This alternative is wholly inadequate for the reasons already discussed.
Lumicore's total fiscal year 2023 revenue was approximately $312.6 million, of which approximately $264.9 million (84.7%) derived from the three accused product lines. The remaining revenue — approximately $47.7 million — comes from non-accused products, engineering services, and other business activities. Aggregated company-wide data would commingle accused and non-accused product financials, making it impossible for Dr. Keating to isolate the revenue, costs, and margins attributable to the accused products — the very information on which OWS's damages theories depend.
Courts have repeatedly rejected efforts by accused infringers to substitute aggregated data for the product-level financial information required in patent damages discovery. See Panoptis, 2020 WL 7364674, at 4 (rejecting accused infringer's offer to produce only company-wide financial data and ordering production of product-level data); Northgate & Co. Elecs., 2023 WL 4489023, at 4 (same); Emerson Elec. Co. v. Suzhou Cleva Elec. Appliance Co., No. 4:14-cv-1277-AGF, 2015 WL 5730957, at *3 (E.D. Mo. Sept. 30, 2015) (ordering production of product-level financial data because "aggregate financial data for [defendant's] entire company would not allow [plaintiff] to calculate damages attributable to the accused products").
The inadequacy of Lumicore's proposed alternative further underscores that its motion is not a genuine effort to protect confidential information, but rather an attempt to deprive OWS of the ability to prove its damages.
3. The Three-Tier Protective Order Adequately Addresses Any Legitimate Confidentiality Concerns. The Proposed Stipulated Protective Order (D.E. 30), which the parties jointly submitted to the Court on August 19, 2024, already provides a robust and well-tailored framework for the protection of confidential information, including financial data. The AEO tier of the proposed order restricts access to sensitive financial information to:
(a) OWS's outside counsel: Alan Ngo, Marcus Delgado, Wendy Schultz, and Omar Siddiqui of Calderwood & Harkness LLP;
(b) OWS's local counsel: James "Jim" Callahan of Whitmore & Callahan LLP;
(c) OWS's retained damages expert: Dr. Lawrence Keating of Meridian Economic Consulting Group, LLC, and members of his team who sign the appropriate undertaking;
(d) The Court and court personnel.
No OWS in-house personnel would have access to AEO-designated materials. Specifically, the following individuals — all of whom are OWS employees with competitive decision-making responsibilities — would be excluded from access:
• Dr. Priya Ramaswamy, Chief Executive Officer
• David Leitner, Chief Financial Officer
• Rebecca Tanaka, General Counsel
• Any other OWS employee, officer, director, or consultant
This framework eliminates any conceivable risk that Lumicore's product-level financial data would be used for competitive advantage in the marketplace. The individuals who would have access — outside counsel, experts, and the Court — are bound by professional obligations, contractual undertakings, and the Court's enforcement power to maintain the confidentiality of AEO-designated materials.
Courts routinely find that AEO protections of this nature are sufficient to address competitive sensitivity concerns associated with financial data in patent cases, even where the parties are direct competitors. See Panoptis, 2020 WL 7364674, at 3 ("AEO designations adequately protect sensitive financial information in patent cases involving competitors"); Northpoint Group Labs., 380 F. Supp. 3d at 319 (finding AEO protections sufficient despite the parties' competitive relationship); Medline Indus., Inc. v. C.R. Bard, Inc., No. 1:03-cv-3075, 2005 WL 97791, at 3 (N.D. Ill. Jan. 12, 2005) ("Protective orders designating sensitive financial information as 'attorneys' eyes only' are a standard and effective mechanism for addressing competitive concerns in patent litigation.").
Lumicore offers no reason to believe that the AEO protections are inadequate in this case, nor does it propose any alternative safeguard short of complete non-disclosure. Lumicore's all-or-nothing approach — produce nothing, or at most produce aggregated data — is inconsistent with the well-established principle that courts should fashion the least restrictive protective order adequate to address legitimate confidentiality concerns.
C. The Proportionality Factors Strongly Favor Production
Even if Lumicore could articulate some basis for concern beyond its conclusory assertions — which it has not — the proportionality factors of Rule 26(b)(1) overwhelmingly favor production of the requested data.
1. Amount in Controversy. OWS seeks approximately $210 million in damages in this action. The financial stakes are substantial for both parties. For Lumicore, a publicly traded company with a market capitalization of approximately $3.4 billion, the accused products represent approximately 84.7% of its total fiscal year 2023 revenue and the foundation of its business. For OWS, this litigation represents a critical effort to protect its core technology portfolio and recover damages for the infringement that has displaced its sales and undermined its competitive position.
In cases involving damages claims of this magnitude, courts consistently find that discovery of detailed financial data is proportional to the needs of the case. See Bramwell Partners LLC v. VLSI Tech. LLC, 2022 WL 2866037, at 6 (W.D. Tex. July 21, 2022) (proportionality favored production of financial data in case involving billions of dollars in dispute); VLSI Tech. LLC v. Bramwell Partners LLC, No. 6:21-cv-00057-ADA, 2022 WL 1658501, at 4 (W.D. Tex. May 25, 2022) (same).
2. Relative Access to Information. Lumicore has exclusive access to its own product-level financial data. OWS has no independent means of obtaining this information. While OWS can estimate certain financial metrics from publicly available sources — such as Lumicore's SEC filings, analyst reports, and industry publications — these estimates are necessarily imprecise and cannot substitute for the actual data that Lumicore maintains in its internal financial systems.
It bears emphasis that OWS has not taken a one-sided approach to financial discovery. OWS has already produced approximately 182,000 documents comprising approximately 1.4 million pages, including OWS's own financial data for its competing products (the OWS-400ZR and OWS-800XR modules). OWS has designated certain of its financial documents as AEO under the proposed protective order framework, demonstrating both its willingness to produce comparable information and its confidence in the adequacy of the AEO protections. Lumicore should be held to the same standard.
3. Importance to Resolving Damages Issues. Without product-level financial data from Lumicore, OWS's damages case cannot proceed. Dr. Keating cannot prepare his expert report — due June 15, 2025 — without this data. Any further delay in Lumicore's production of the financial data will prejudice OWS by compressing the time available for expert analysis and may necessitate extensions of the expert discovery schedule, disrupting the orderly progression of this litigation toward trial.
The importance of this data to the resolution of damages issues cannot be overstated. Damages are an essential element of OWS's patent infringement claims. Without the ability to present a well-supported damages case, OWS would be deprived of the relief to which it is entitled under 35 U.S.C. § 284.
4. Burden of Production. Lumicore is a sophisticated, publicly traded corporation with a Chief Financial Officer (Janet Moreno), audited financial statements prepared by its independent auditor Brennan Kellogg & Associates LLP, and established enterprise resource planning and financial reporting systems. As a public company subject to SEC reporting requirements, Lumicore is required to maintain detailed financial records, including product-level revenue and cost data, for purposes of segment reporting under ASC 280, management reporting, and corporate governance.
Product-level revenue and cost-of-goods-sold data is maintained in the ordinary course of Lumicore's business. The burden of extracting this data from Lumicore's existing financial systems and producing it in response to OWS's discovery requests is minimal — a matter of generating reports from systems that already contain the data. Lumicore has not identified any specific burden associated with production, nor has it offered any evidence that the production would be unduly expensive or time-consuming. The proportionality balance decisively favors production.
D. The Court Should Grant Lumicore's Motion Only in Part — Permitting Designation of Financial Data as AEO
OWS recognizes that Lumicore's product-level financial data is competitively sensitive, and OWS does not seek to minimize that sensitivity. OWS has not opposed — and does not now oppose — reasonable confidentiality protections for this data. To the contrary, OWS has affirmatively agreed that Lumicore may designate its product-level financial data at the "Highly Confidential — Attorneys' Eyes Only" tier under the Proposed Stipulated Protective Order (D.E. 30). OWS consents to the entry of the Proposed Stipulated Protective Order, which has been jointly submitted and reflects the parties' agreement on the structure and terms of the three-tier confidentiality framework.
What OWS opposes — and what the Court should deny — is Lumicore's request to either:
(a) withhold product-level financial data from discovery entirely; or
(b) produce only aggregated company-wide revenue and cost figures in lieu of product-level data; or
(c) impose restrictions beyond the AEO tier that would prevent Dr. Keating from analyzing the data in the course of preparing his expert report.
Any of these outcomes would deprive OWS of the ability to prove damages — an essential element of its patent infringement claims. Lumicore has not demonstrated good cause for any of these measures, and the proportionality factors overwhelmingly favor production.
OWS respectfully requests that the Court enter an order directing Lumicore to produce product-level financial data for each of the three accused product lines — the LumiLink 400G-ZR+, the LumiLink 800G-DR8, and the LumiEdge 1600G-LR — including the following categories of information:
(1) Unit sales data: The number of units of each accused product sold, by quarter, from Q3 2022 (the launch of the first accused product) through the most recently completed quarter at the time of production.
(2) Revenue by product: Total revenue for each accused product, broken down by quarter, from Q3 2022 through the most recently completed quarter.
(3) Revenue by customer: Revenue for each accused product, broken down by customer, for each quarter during the relevant period.
(4) Cost of goods sold: Total cost of goods sold for each accused product, broken down by quarter, including direct materials costs, direct labor costs, and manufacturing overhead allocated to each product.
(5) Gross margin by product: Gross margin (revenue less cost of goods sold) for each accused product, by quarter.
(6) Average selling prices: Weighted average selling prices for each accused product, by quarter.
All such data should be subject to designation as "Highly Confidential — Attorneys' Eyes Only" under the Proposed Stipulated Protective Order (D.E. 30), with access limited to OWS's outside counsel, OWS's retained damages expert (Dr. Keating), and the Court.
This outcome is consistent with the approach routinely adopted by courts in this District and throughout the federal system in patent cases involving financial discovery disputes between competitors. It protects Lumicore's legitimate confidentiality interests while ensuring that OWS has access to the information it needs to prove its damages claims. It is the least restrictive alternative adequate to serve both interests, and it is squarely supported by the case law.
V. CONCLUSION
For the foregoing reasons, Plaintiff Optiwave Semiconductor Corp. respectfully requests that the Court enter an order:
1. Granting Lumicore's Motion in Part — to the extent Lumicore seeks designation of its product-level financial data as "Highly Confidential — Attorneys' Eyes Only" under the Proposed Stipulated Protective Order (D.E. 30), the Court should grant the motion and enter the Proposed Stipulated Protective Order;
2. Denying Lumicore's Motion in Part — to the extent Lumicore seeks to withhold product-level financial data entirely, or to substitute aggregated company-wide data for product-level data, the Court should deny the motion;
3. Ordering Production — the Court should order Lumicore to produce product-level financial data for the LumiLink 400G-ZR+, the LumiLink 800G-DR8, and the LumiEdge 1600G-LR product lines, including unit sales, revenue by product and by customer, cost of goods sold, gross margins, and average selling prices, subject to AEO designation under the Stipulated Protective Order; and
4. Setting a Production Deadline — the Court should set a deadline for Lumicore's production of the financial data consistent with the existing discovery schedule, allowing sufficient time for Dr. Keating to receive, analyze, and incorporate the data into his expert report, which is due June 15, 2025. OWS proposes that the Court order production within fourteen (14) days of entry of the order, or such other period as the Court deems appropriate.
OWS respectfully requests such other and further relief as this Court deems just and proper.
Respectfully submitted,
October 7, 2024
CALDERWOOD & HARKNESS LLP
By: ________
Alan Ngo (CA Bar No. 247819; admitted pro hac vice) Marcus Delgado (TX Bar No. 24089631) Wendy Schultz (CA Bar No. 312457; admitted pro hac vice) Omar Siddiqui (CA Bar No. 325891; admitted pro hac vice)
350 South Grand Avenue, 48th Floor Los Angeles, California 90071 Telephone: (213) 486-3200 Facsimile: (213) 486-3201
Email: alan.ngo@calderwoodharkness.com
Email: marcus.delgado@calderwoodharkness.com
Email: wendy.schultz@calderwoodharkness.com
Email: omar.siddiqui@calderwoodharkness.com
Local Counsel:
WHITMORE & CALLAHAN LLP
By: ________
James "Jim" Callahan (TX Bar No. 18756432)
110 North College Avenue, Suite 800 Tyler, Texas 75702 Telephone: (903) 592-4100 Facsimile: (903) 592-4101
Email: jcallahan@whitmorecallahan.com
Attorneys for Plaintiff Optiwave Semiconductor Corp.
CERTIFICATE OF SERVICE
I hereby certify that on October 7, 2024, a true and correct copy of the foregoing PLAINTIFF OPTIWAVE SEMICONDUCTOR CORP.'S OPPOSITION TO DEFENDANT'S MOTION FOR PROTECTIVE ORDER REGARDING FINANCIAL DATA and all exhibits attached thereto was served on all counsel of record via the Court's CM/ECF electronic filing system, which will send notification of such filing to the following:
Catherine "Kate" Rourke Darren Cho Samantha Briggs Rohan Iyer HAWTHORNE VEGA & CRUZ LLP 600 Congress Avenue, Suite 2400 Austin, Texas 78701 Telephone: (512) 391-7800
Email: krourke@hawthornevega.com
Email: dcho@hawthornevega.com
Email: sbriggs@hawthornevega.com
Email: riyer@hawthornevega.com
Maria Garza TRASK EDDINGTON LLP 425 East Front Street, Suite 300 Tyler, Texas 75701 Telephone: (903) 593-2200
Email: mgarza@traskeddington.com
Counsel for Defendant Lumicore Technologies, Inc.
________________________________________
Wendy Schultz
CERTIFICATE OF CONFERENCE
Pursuant to Local Rule CV-7(h) of the Eastern District of Texas, the undersigned counsel hereby certifies as follows:
On or about September 20, 2024, counsel for OWS (Wendy Schultz of Calderwood & Harkness LLP) met and conferred telephonically with counsel for Lumicore (Samantha Briggs of Hawthorne Vega & Cruz LLP) regarding Lumicore's objections to OWS's Requests for Production Nos. 47–54, 61, and 68–72 of OWS's First Set of Requests for Production to Lumicore, which seek product-level financial data for the accused products. During this conference, the parties discussed the nature and scope of the financial data at issue, the basis for Lumicore's objections, and potential resolutions.
OWS proposed that Lumicore produce the requested product-level financial data — including unit sales, revenue by product and by customer, cost of goods sold, gross margins, and average selling prices — subject to designation as "Highly Confidential — Attorneys' Eyes Only" under the Proposed Stipulated Protective Order (D.E. 30). OWS emphasized that AEO designation would prevent any OWS in-house personnel from accessing the data and would limit access to outside counsel, Dr. Keating, and the Court.
Lumicore rejected this proposal, taking the position that product-level cost and margin data is "trade secret" information that should not be disclosed even under AEO protections. Lumicore counterproposed that it would produce only aggregated company-wide revenue and cost figures as reported in its publicly filed Form 10-K with the SEC. OWS rejected this counterproposal as inadequate to support OWS's damages analysis.
On or about October 1, 2024, counsel for OWS (Wendy Schultz) and counsel for Lumicore (Samantha Briggs) met and conferred again by telephone in a further attempt to resolve the dispute. During this second conference, OWS offered an additional compromise: OWS proposed that Lumicore produce product-level revenue data (without cost or margin data) as an initial production, with cost and margin data to follow after the Court ruled on the pending Proposed Stipulated Protective Order. Lumicore also rejected this proposal, maintaining its position that no product-level financial data should be produced.
The parties were unable to reach agreement on any aspect of the dispute. On October 3, 2024, Lumicore filed its Motion for Protective Order (D.E. 42), and OWS now files this Opposition.
The undersigned counsel certifies that she has made a genuine, good-faith effort to resolve this dispute with opposing counsel before seeking judicial resolution, and that despite those efforts, the dispute remains unresolved and requires the Court's intervention.
________________________________________
Wendy Schultz
EXHIBIT A
[PROPOSED] ORDER ON DEFENDANT'S MOTION FOR PROTECTIVE ORDER REGARDING FINANCIAL DATA