[slide 1]
Cover Slide — Damages Presentation
Optiwave Semiconductor Corp. v. Lumicore Technologies, Inc.
Case No. 2:24-cv-00319-JRG — United States District Court, Eastern District of Texas
Before Judge James R. Gilstrap
Damages Analysis Prepared in Coordination with Dr. Lawrence Keating, Managing Director, Meridian Economic Consulting Group, LLC
Presentation by Calderwood & Harkness LLP on behalf of Plaintiff Optiwave Semiconductor Corp.
[slide 2]
Roadmap — Three Pillars of Damages
Pillar 1: Lost Profits — Sales OWS lost directly to Lumicore's infringing products (~$128.9M)
Pillar 2: Reasonable Royalty — Fair compensation for sales OWS could not have captured (~$37.5M)
Pillar 3: Enhanced Damages for Willful Infringement — Accountability for Lumicore's deliberate conduct
Aggregate Damages Demand: Approximately $210 Million
[slide 3]
The Accused Products and Their Revenue
LumiLink 400G-ZR+ — Launched Q3 2022 — FY 2023 Revenue: $94.8M — Infringes '847, '193, '562 Patents
LumiLink 800G-DR8 — Launched Q1 2023 — FY 2023 Revenue: $128.4M — Infringes '847, '193, '562, '015 Patents
LumiEdge 1600G-LR — Launched Q4 2023 — FY 2023 Revenue: $41.7M — Infringes '193, '015 Patents
Total Accused-Product Revenue in FY 2023 Alone: $264.9M
Accused products represent approximately 84.7% of Lumicore's total FY 2023 revenue ($312.6M)
[slide 4]
Revenue Growth Timeline — Lumicore's Accused Products (Q3 2022 – Q4 2025 Projected)
Infringement Period Begins: Q3 2022 (LumiLink 400G-ZR+ launch)
Total Accused-Product Revenue Q3 2022 – Q1 2024 (through filing): ~$378.2M
Projected Total Accused-Product Revenue Q3 2022 – Q4 2025 (through trial): ~$714.6M
Revenue trajectory shows accelerating growth as Lumicore expanded product line despite patent notice
Key inflection points: LumiLink 800G-DR8 launch (Q1 2023), LumiEdge 1600G-LR launch (Q4 2023)
[slide 5]
Pillar 1: Lost Profits — The Panduit Framework
Factor 1: Demand for the Patented Product — OWS FY 2023 revenue of $487.3M demonstrates strong market demand
Factor 2: Absence of Acceptable Non-Infringing Substitutes — Analysis of 4 potential alternatives; each lacks key patented features
Factor 3: Manufacturing and Marketing Capability — OWS has capacity at foundry partners to serve displaced demand
Factor 4: Amount of Profit OWS Would Have Made — OWS gross margin on competing products: 47.3%
[slide 6]
Lost-Sales Analysis — Market Share Displacement
OWS and Lumicore compete head-to-head at 12 of the top 20 hyperscale data-center operators
Market-share displacement factor: 38.2% — the share of Lumicore's accused-product sales OWS would have captured 'but for' infringement
Adjusted for customers where OWS is not an approved vendor
Supported by customer overlap data, design-in opportunity evidence, and OWS sales personnel testimony
Remaining 61.8% of sales addressed under the reasonable royalty theory
[slide 7]
Lost Profits Calculation
Projected Accused-Product Revenue (Q3 2022 – Q4 2025): ~$714.6M
× Market-Share Displacement Factor: 38.2%
= Lost Revenue to OWS: ~$272.9M
× OWS Gross Margin: 47.3%
= Lost Profits Damages: ~$128.9M
[slide 8]
Price Erosion — Additional Lost Profits Impact
Average Selling Price of 400G-ZR Transceivers Declined 18.7% from Q3 2022 to Q4 2023
Price erosion attributable in part to Lumicore's market entry with infringing products at lower price points
OWS forced to reduce prices on OWS-400ZR and OWS-800XR modules to remain competitive
Price erosion impact supports incremental damages beyond lost-unit-volume analysis
7 major hyperscale customers purchase from both OWS and Lumicore — direct price competition
[slide 9]
Pillar 2: Reasonable Royalty — The Georgia-Pacific Framework
Applies to Lumicore sales where OWS could not have captured the sale (61.8% of accused-product revenue)
Hypothetical negotiation date: Q2 2022 — just before first accused product launch
Willing licensor (OWS) and willing licensee (Lumicore) negotiate at arm's length
15 Georgia-Pacific factors guide the determination of a reasonable royalty rate
Proposed royalty rate: 8.5% of accused-product net sales
[slide 10]
Georgia-Pacific Factor Summary
Factor 1 (Established Royalties): OWS has three existing licenses at 6.5%, 7.75%, and 9.0% royalty rates
Factor 2 (Comparable Licenses): Stratos v. ArcLight (8.0%), Coreline v. Prisma (10.2% effective rate)
Factor 8 (Commercial Success): OWS products practicing the patents generated ~$310M in FY 2023 revenue
Factor 9 (Utility/Advantages): Patented features — waveguide multiplexer, thermal management, grating coupler — are core to performance
Factor 13 (Contribution of the Patent): Patented features drive customer demand — entire-market-value rule applies at module level
Industry royalty range: 4.0%–12.5%; proposed 8.5% is within the established range
[slide 11]
Royalty Rate Benchmark Comparison Chart
OWS–Terralink Semiconductor (2020): 6.5%
OWS–Helix Integrated Photonics (2022): 7.75% + $2.5M upfront
Stratos Photonics v. ArcLight Systems (2019): 8.0%
Proposed Rate: 8.5%
OWS–NovaWave Corp. (2021): 9.0%
Coreline Technologies v. Prisma Semiconductor (2021): 10.2%
Industry Range: 4.0%–12.5%
[slide 12]
Reasonable Royalty Calculation
Projected Accused-Product Revenue (Q3 2022 – Q4 2025): ~$714.6M
Less: Revenue Subject to Lost Profits Theory (38.2%): ~$273.0M
= Royalty Base (remaining 61.8%): ~$441.6M
× Reasonable Royalty Rate: 8.5%
= Reasonable Royalty Damages: ~$37.5M
[slide 13]
Apportionment — Why Module-Level Revenue Is the Correct Base
Smallest Salable Patent-Practicing Unit (SSPPU): The transceiver module itself is the smallest unit sold commercially
Patented features — waveguide multiplexer, thermal management micro-channels, grating coupler — are integral to module function
Customers purchase modules, not individual photonic sub-components
Patented features are the basis for customer demand — Entire Market Value Rule (EMVR) properly applies
Lumicore's own marketing materials tout the very features covered by OWS's patents as key differentiators
[slide 14]
Compensatory Damages Summary — Before Enhancement
Lost Profits (Panduit): ~$128.9M
Reasonable Royalty (Georgia-Pacific): ~$37.5M
Total Compensatory Damages: ~$166.4M
This represents fair compensation for Lumicore's use of OWS's patented technology from Q3 2022 through trial
[slide 15]
Pillar 3: Willful Infringement — Timeline of Notice and Deliberate Conduct
Jan. 15, 2023: FairPoint Licensing sends first notice letter to Lumicore GC Raymond Bautista identifying '847, '193, '562 Patents
Feb. 28, 2023: Lumicore responds through Hawthorne Vega & Cruz LLP, disputing infringement
Apr. 20, 2023: In-person licensing meeting in Austin, TX — Lumicore shows 'no interest in negotiating' (Angela Reeves testimony)
May 15, 2023: FairPoint sends second letter adding '015 Patent and LumiLink 800G-DR8
July 10, 2023: Lumicore formally declines license, citing 'competent legal opinions' it refuses to produce
Q4 2023: Lumicore launches LumiEdge 1600G-LR — a new infringing product — despite full knowledge of OWS's patent rights
[slide 16]
Enhanced Damages Calculation — Willful Infringement
Post-Notice Lost Profits (January 15, 2023 – projected trial): ~$109.2M
Applicable Enhancement Multiplier: Up to 3× under 35 U.S.C. § 284 (per Halo v. Pulse)
Enhancement Sought on Post-Notice Component: Up to $109.2M additional (2× on post-notice lost profits)
Total Damages Demand (Compensatory + Enhancement): ~$210.0M
Enhancement reflects the egregiousness of Lumicore's deliberate, knowing infringement after clear notice
[slide 17]
Read Factors — Supporting Enhancement
1. Deliberate Copying: Lumicore engineers reviewed OWS published patent applications during design phase (Michaud deposition; Chen testimony)
2. Good-Faith Investigation: Lumicore claims 'competent legal opinions' but refuses to produce them; no design-around before LumiEdge launch
3. Litigation Conduct: Lumicore has resisted discovery, asserting privilege over critical opinion letters
4. Size and Financial Condition: Lumicore is a $3.4B market-cap public company with resources to license or design around
5. Closeness of the Case: Strong infringement evidence across all four patents and three product lines
6. Duration of Misconduct: Over two years of continued infringement after notice (Jan 2023 – present)
7. Remedial Action: None — Lumicore continues to sell all accused products without modification
8. Motivation: Accused products represent ~$264.9M / ~84.7% of Lumicore's FY 2023 revenue — powerful financial incentive
9. Attempted Concealment: Refusal to produce opinion letters and privilege assertions over relevant communications
[slide 18]
Impact of a Permanent Injunction
OWS seeks permanent injunction barring Lumicore from making, using, selling, or importing accused products
Approximately 42% of Lumicore's product revenue would be affected
Lumicore estimates redesign would take 18–24 months
Damages award compensates for past infringement; injunction prevents future harm
Monetary damages alone are inadequate — price erosion (18.7% ASP decline) and customer diversion are ongoing
[slide 19]
Total Damages Summary
Lost Profits (Panduit): ~$128.9M
Reasonable Royalty (Georgia-Pacific, 8.5%): ~$37.5M
Willful Infringement Enhancement: ~$43.6M (conservative/selected)
TOTAL DAMAGES DEMAND: ~$210.0M
This is what OWS is owed for Lumicore's knowing, deliberate use of OWS's patented technology
[slide 20]
Recovery Scenarios — Best, Expected, Conservative
Conservative Recovery: ~$145M (compensatory damages only, no enhancement, lower market-share displacement sensitivity)
Expected Recovery: ~$166.4M (full lost profits + reasonable royalty, no enhancement)
Best Case — With Willful Enhancement: $210M–$285M (2×–3× on willful component)
OWS requests the jury find willful infringement and award at least $210M
[slide 21]
Conclusion — Accountability and Fair Compensation
OWS invested years of R&D and millions of dollars developing breakthrough silicon-photonics technology
Lumicore knew about OWS's patents, copied the technology, refused a license, and launched new infringing products
The accused products generated over $714 million in projected revenue using OWS's innovations
OWS asks the jury to award $210 million in damages — the fair price for Lumicore's deliberate infringement
A full damages award protects innovation, deters copying, and ensures patent rights have meaning