[sheet: Cover]
Field | Value
Document Title | Willful Infringement Damages Scenario Analysis
Matter | Optiwave Semiconductor Corp. v. Lumicore Technologies, Inc.
Case No. | 2:24-cv-00319-JRG (E.D. Tex.)
Court | United States District Court for the Eastern District of Texas, marshall Division
Presiding Judge | Judge James R. Gilstrap
Prepared By | Calderwood & Harkness LLP
Authors | Omar Siddiqui (Working Associate); Wendy Schultz (Lead Associate); reviewed by Alan Ngo (Responsible Partner)
Date Prepared | April 15, 2024
Status | Internal Work Product — Attorney-Client Privileged
Confidentiality | PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
Client | Optiwave Semiconductor Corp. (OWS)
Client Contact | Rebecca Tanaka, General Counsel
PE Sponsor | Ridgeline Capital Partners, LP — Franklin Osei, Board Chair / Managing Partner
Purpose | Model enhanced damages under various willfulness multiplier scenarios to calibrate the aggregate damages demand in the complaint
Plaintiff's Counsel | Calderwood & Harkness LLP, 350 South Grand Avenue, 48th Floor, Los Angeles, CA 90071
Defendant | Lumicore Technologies, Inc.
Defendant's Counsel | Hawthorne Vega & Cruz LLP, 600 Congress Avenue, Suite 2400, Austin, TX 78701
Damages Expert | Dr. Lawrence Keating, Meridian Economic Consulting Group, LLC
Related Documents | Damages Theory Strategy Memorandum (April 2024); Willful Infringement Memorandum (April 10, 2024); Timeline of Notice and Willfulness Evidence (April 12, 2024)
[sheet: Assumptions]
Assumption Category | Parameter | Value | Source / Notes
Accused Products | LumiLink 400G-ZR+ | Launch: Q3 2022 | Accused of infringing '847, '193, '562 Patents
Accused Products | LumiLink 800G-DR8 | Launch: Q1 2023 | Accused of infringing '847, '193, '562, '015 Patents
Accused Products | LumiEdge 1600G-LR | Launch: Q4 2023 | Accused of infringing '193, '015 Patents
Revenue — FY 2023 | LumiLink 400G-ZR+ FY23 Revenue | $94,800,000 | Per Lumicore segment disclosures
Revenue — FY 2023 | LumiLink 800G-DR8 FY23 Revenue | $128,400,000 | Per Lumicore segment disclosures
Revenue — FY 2023 | LumiEdge 1600G-LR FY23 Revenue | $41,700,000 | Per Lumicore segment disclosures
Revenue — FY 2023 | Total Accused Product Revenue (FY23) | $264,900,000 | Sum of three product lines: $94.8M + $128.4M + $41.7M
Revenue — Infringement Period | Total Accused Product Revenue (Q3 2022 – Q1 2024) | $378,200,000 | Per Dr. Keating preliminary analysis
Revenue — Projected | Projected Accused Product Revenue (Q3 2022 – Q4 2025, through trial) | $714,600,000 | Per Dr. Keating preliminary analysis
OWS Financials | OWS FY 2023 Revenue | $487,300,000 | Per Gresham & Whitfield LLP audited financials
OWS Financials | OWS FY 2023 Net Income | $61,400,000 | Per Gresham & Whitfield LLP audited financials
OWS Financials | OWS Gross Margin on Competing Products | 47.3% | Per OWS internal financials produced in discovery
Lost Profits — Panduit | Market-Share Displacement Factor | 38.2% | Based on customer overlap analysis — OWS and Lumicore compete at 12 of top 20 hyperscale operators
Lost Profits — Panduit | Lost-Profit Revenue Base (through trial) | $714,600,000 × 38.2% = $273,017,200 | Portion of accused-product revenue attributable to displaced OWS sales
Lost Profits — Panduit | Lost Profits Estimate (full period, Q3 2022 – Q4 2025) | $128,900,000 | $714.6M × 38.2% × 47.3% ≈ $128.9M
Reasonable Royalty | Proposed Royalty Rate | 8.5% | Georgia-Pacific analysis; supported by comparable licenses (range 4.0%–12.5%)
Reasonable Royalty | Royalty Base (non-lost-profit sales) | $441,600,000 | $714.6M – ($714.6M × 38.2%) = $441.6M
Reasonable Royalty | Reasonable Royalty Estimate | $37,500,000 | $441.6M × 8.5% ≈ $37.5M
Willfulness — Notice Dates | First Notice Date (FairPoint Letter #1) | January 15, 2023 | Letter from FairPoint Licensing Group (Angela Reeves) to Lumicore GC (Raymond Bautista) identifying '847, '193, '562 Patents
Willfulness — Notice Dates | Second Notice Date (FairPoint Letter #2) | May 15, 2023 | Adds '015 Patent; expands to include LumiLink 800G-DR8
Willfulness — Notice Dates | In-Person Meeting | April 20, 2023 | Austin, TX — Angela Reeves (FairPoint), Rebecca Tanaka (OWS), Raymond Bautista (Lumicore), Kate Rourke (Hawthorne Vega & Cruz)
Willfulness — Notice Dates | Lumicore Declination | July 10, 2023 | Lumicore declines license; references 'competent legal opinions' — opinion letters not produced
Willfulness — Notice Dates | Post-Notice Product Launch | Q4 2023 | LumiEdge 1600G-LR launched after receiving notice of all four patents
Willfulness — Notice Period | Post-Notice Period Start | January 15, 2023 | Date of first FairPoint licensing letter
Willfulness — Notice Period | Post-Notice Period End (projected) | Q4 2025 (trial) | Through projected trial date of February 2, 2026
Willfulness — Post-Notice Revenue | Post-Notice Accused Product Revenue (Jan 2023 – Q4 2025) | See Post-Notice Revenue tab | Subset of projected revenue occurring after first notice
Willfulness — Post-Notice Lost Profits | Post-Notice Lost Profits | $109,200,000 | Lost profits accruing from Jan 15, 2023 through projected trial
Enhancement Statute | 35 U.S.C. § 284 | Up to 3× damages | Discretionary; per Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93 (2016)
Enhancement Multipliers | Scenario multipliers modeled | 1.5×, 2×, 3× | Applied to various damage bases per scenario tabs
Lumicore Market Context | Lumicore IPO | March 2022, Nasdaq, $24/share
Lumicore Market Context | Lumicore Share Price at Filing | ~$37/share | As of April 22, 2024
Lumicore Market Context | Lumicore Shares Outstanding | 91,800,000 | Approximate
Lumicore Market Context | Lumicore Market Cap at Filing | ~$3,400,000,000 | 91.8M × $37 ≈ $3.4B
Lumicore Market Context | Lumicore FY 2023 Total Revenue (est.) | $312,600,000 | Per Lumicore 10-K
Lumicore Market Context | Lumicore Revenue at Risk if Injunction | ~42% | Per OWS analysis of accused product share of total revenue
Lumicore Market Context | Estimated Redesign Timeline | 18–24 months | Per Lumicore's own estimate
Comparable Licenses | OWS – Terralink Semiconductor (2020) | 6.5% running royalty on $45M licensed revenue
Comparable Licenses | OWS – NovaWave Corp. (2021) | 9.0% running royalty on $22M licensed revenue
Comparable Licenses | OWS – Helix Integrated Photonics (2022) | 7.75% running royalty + $2.5M upfront on $68M licensed revenue
Comparable Licenses | Stratos Photonics v. ArcLight Systems (2019 settlement) | 8.0% royalty | Industry comparable
Comparable Licenses | Coreline Technologies v. Prisma Semiconductor (2021 cross-license) | 10.2% effective rate | Industry comparable
Patent Information | Asserted Patents | U.S. 10,234,847 ('847); U.S. 10,891,193 ('193); U.S. 9,678,562 ('562); U.S. 11,402,015 ('015) | Four utility patents
Patent Information | '562 Patent Original Assignee | Solara Optics, Inc. | Acquired by OWS via APA dated June 15, 2018 for $34.5M (12 patents total)
Patent Information | '847 and '562 Relationship | Same family (continuation)
Patent Information | '193 and '015 Relationship | Common provisional (62/499,117, filed April 7, 2017)
[sheet: Post-Notice Revenue]
Quarter | LumiLink 400G-ZR+ Revenue | LumiLink 800G-DR8 Revenue | LumiEdge 1600G-LR Revenue | Total Accused Revenue | Cumulative Accused Revenue | Notes
Q1 2023 | $21,500,000 | $8,200,000 | $0 | $29,700,000 | $29,700,000 | 800G-DR8 launches Q1 2023; partial quarter
Q2 2023 | $23,100,000 | $24,600,000 | $0 | $47,700,000 | $77,400,000
Q3 2023 | $24,800,000 | $35,900,000 | $0 | $60,700,000 | $138,100,000
Q4 2023 | $25,400,000 | $38,200,000 | $12,500,000 | $76,100,000 | $214,200,000 | LumiEdge 1600G-LR launches Q4 2023 — post all notices
Q1 2024 | $24,200,000 | $40,100,000 | $15,800,000 | $80,100,000 | $294,300,000
Q2 2024 (est.) | $22,800,000 | $42,500,000 | $18,200,000 | $83,500,000 | $377,800,000 | Estimated
Q3 2024 (est.) | $21,500,000 | $44,000,000 | $20,500,000 | $86,000,000 | $463,800,000 | Estimated
Q4 2024 (est.) | $20,800,000 | $45,200,000 | $22,800,000 | $88,800,000 | $552,600,000 | Estimated
Q1 2025 (est.) | $19,500,000 | $46,800,000 | $24,500,000 | $90,800,000 | $643,400,000 | Estimated
Q2 2025 (est.) | $18,200,000 | $47,500,000 | $26,000,000 | $91,700,000 | $735,100,000 | Estimated
Q3 2025 (est.) | $17,800,000 | $48,000,000 | $27,500,000 | $93,300,000 | $828,400,000 | Estimated
Q4 2025 (est.) | $17,000,000 | $48,500,000 | $28,800,000 | $94,300,000 | $922,700,000 | Estimated — through projected trial Feb 2, 2026
TOTAL (Post-Notice) | $256,600,000 | $469,500,000 | $196,600,000 | $922,700,000 | Sum of all post-notice quarters Q1 2023 – Q4 2025
Reconciliation | Post-notice revenue ($922.7M) includes projected growth beyond initial $714.6M full-period estimate; $714.6M figure includes Q3–Q4 2022 pre-notice revenue (~$52M) plus post-notice through Q4 2025. Post-notice lost profits of ~$109.2M represent the post-Jan 15, 2023 subset of the $128.9M total lost-profits figure, calibrated per Dr. Keating's preliminary model.
[sheet: Base Damages Summary]
Damages Component | Period | Revenue Base | Rate / Margin | Damages Amount | Notes
Lost Profits — Full Infringement Period | Q3 2022 – Q4 2025 | $714,600,000 | 38.2% displacement × 47.3% margin | $128,900,000 | Panduit analysis; 12 of top 20 hyperscale customers overlap
Lost Profits — Post-Notice Period Only | Jan 15, 2023 – Q4 2025 | See Post-Notice Revenue tab | 38.2% × 47.3% | $109,200,000 | Subset of full-period lost profits accruing after first FairPoint letter
Lost Profits — Pre-Notice Period | Q3 2022 – Jan 14, 2023 | ~$52,000,000 (pre-notice accused revenue) | 38.2% × 47.3% | $19,700,000 | Approximately $128.9M − $109.2M
Reasonable Royalty — Non-Displaced Sales | Q3 2022 – Q4 2025 | $441,600,000 | 8.5% | $37,500,000 | Georgia-Pacific; applied to revenue not covered by lost-profits theory
Subtotal — Base Damages (No Enhancement) | Q3 2022 – Q4 2025 | $166,400,000 | $128.9M + $37.5M
Willful Enhancement Base — Post-Notice Lost Profits | Jan 15, 2023 – Q4 2025 | $109,200,000 | Primary base for enhancement under 35 U.S.C. § 284
Willful Enhancement Base — Full Lost Profits | Q3 2022 – Q4 2025 | $128,900,000 | Alternative base if Court applies enhancement to all lost profits
Willful Enhancement Base — All Damages | Q3 2022 – Q4 2025 | $166,400,000 | Maximum base if Court enhances all damages components
[sheet: Scenario Matrix]
Scenario ID | Enhancement Base Description | Enhancement Base Amount | Multiplier | Enhancement Amount | Non-Enhanced Component | Total Damages | % of Lumicore FY23 Revenue | % of Lumicore Market Cap | Notes
A0 | No Enhancement (Baseline) | $0 | 1.0× | $0 | $166,400,000 | $166,400,000 | 53.2% | 4.9% | Base case: $128.9M lost profits + $37.5M reasonable royalty; no willful enhancement
A1 | Post-Notice Lost Profits Only — 1.5× Enhancement | $109,200,000 | 1.5× | $54,600,000 | $57,200,000 | $221,000,000 | 70.7% | 6.5% | Enhancement = $109.2M × 0.5 = $54.6M; Non-enhanced = $19.7M pre-notice LP + $37.5M royalty = $57.2M; Total = $109.2M × 1.5 + $57.2M
A2 | Post-Notice Lost Profits Only — 2× Enhancement | $109,200,000 | 2.0× | $109,200,000 | $57,200,000 | $275,600,000 | 88.2% | 8.1% | Enhancement = $109.2M × 1.0 = $109.2M; Non-enhanced = $57.2M; Total = $109.2M × 2 + $57.2M
A3 | Post-Notice Lost Profits Only — 3× Enhancement | $109,200,000 | 3.0× | $218,400,000 | $57,200,000 | $384,800,000 | 123.1% | 11.3% | Enhancement = $109.2M × 2.0 = $218.4M; treble max on post-notice LP
B1 | Full Lost Profits — 1.5× Enhancement | $128,900,000 | 1.5× | $64,450,000 | $37,500,000 | $230,850,000 | 73.8% | 6.8% | Enhancement on all LP including pre-notice period
B2 | Full Lost Profits — 2× Enhancement | $128,900,000 | 2.0× | $128,900,000 | $37,500,000 | $295,300,000 | 94.5% | 8.7%
B3 | Full Lost Profits — 3× Enhancement | $128,900,000 | 3.0× | $257,800,000 | $37,500,000 | $424,200,000 | 135.7% | 12.5% | Treble all lost profits
C1 | All Damages — 1.5× Enhancement | $166,400,000 | 1.5× | $83,200,000 | $0 | $249,600,000 | 79.8% | 7.3% | Enhancement applied to lost profits + reasonable royalty
C2 | All Damages — 2× Enhancement | $166,400,000 | 2.0× | $166,400,000 | $0 | $332,800,000 | 106.5% | 9.8%
C3 | All Damages — 3× Enhancement | $166,400,000 | 3.0× | $332,800,000 | $0 | $499,200,000 | 159.7% | 14.7% | Maximum theoretical recovery — treble all damages
[sheet: Complaint Demand Calibration]
Item | Value | Notes
Baseline Damages (No Enhancement) | $166,400,000 | Lost profits $128.9M + reasonable royalty $37.5M
Scenario A2 (Post-Notice LP × 2×) | $275,600,000 | Most aggressive scenario deemed likely to be awarded by court
Scenario A2 Enhancement Portion | $109,200,000 | Post-notice lost profits doubled
Selected Willful Enhancement Component for Complaint | $43,600,000 | Conservative partial enhancement: reflects blended probability weighting of enhancement scenarios
Total Complaint Demand | $210,000,000 | $128.9M lost profits + $37.5M reasonable royalty + $43.6M willful component ≈ $210.0M (rounded)
Reconciliation Check | $128,900,000 + $37,500,000 + $43,600,000 = $210,000,000 | Confirmed — matches complaint allegation of approximately $210M
Probability-Weighted Expected Recovery | $138,000,000 | Decision-tree analysis: 75% probability of prevailing on liability × 85% probability of surviving invalidity × damages range; per Settlement Authority Memorandum
Success Fee Threshold | $150,000,000 | Per engagement letter: C&H earns 5% success fee on net recovery above $150M
Success Fee on $210M Recovery | $3,000,000 | ($210M − $150M) × 5% = $3.0M
Recommended Settlement Floor (for reference) | $100,000,000 – $125,000,000 | Per Settlement Authority Memorandum: $125M cash + royalty-bearing license, or $100M cash + injunction
Client Presentation Range — Without Enhancement | $145,000,000 – $210,000,000 | Conservative to optimistic without full enhancement
Client Presentation Range — With Full Enhancement | $210,000,000 – $285,000,000 | Includes willful infringement scenarios
Scenario A2 Selected as Primary Enhancement Theory | 2× on post-notice lost profits | Sought in complaint: multiplier of 2× on post-notice period ($109.2M × 1 enhancement = $109.2M added); complaint demand is conservative at $43.6M selected component
Rationale for Conservative Demand | $210M vs. $275.6M (Scenario A2) | Complaint demand reflects risk discount for: (a) claim construction uncertainty; (b) potential invalidity findings; (c) judicial discretion on enhancement; (d) jury variability on damages