CALDERWOOD & HARKNESS LLP 555 California Street, 42nd Floor San Francisco, California 94104 Telephone: (415) 773-6200
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Marcus Whitfield, General Counsel, Optiwave Semiconductor Corp. Sandra Koh, IP Manager / In-House Patent Counsel, Optiwave Semiconductor Corp.
FROM: Catherine Bloom, Partner (USPTO Reg. No. 58,412) Christy Bauer, Associate (USPTO Reg. No. 74,329)
DATE: January 22, 2025
RE: Abandonment Impact Assessment — Application-by-Application Analysis of Commercial and Legal Consequences
MATTER NO.: 1014-00005
PRIVILEGE: This memorandum is protected by the attorney-client privilege and constitutes attorney work product prepared in anticipation of litigation and for the purpose of providing legal advice. It is intended solely for the use of the addressees and should not be disclosed to any third party without prior written consent of Calderwood & Harkness LLP.
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I. Executive Summary
This memorandum provides Optiwave Semiconductor Corp. ("OWS" or the "Company") management with a detailed, application-by-application assessment of the commercial, legal, competitive, and financial consequences that would result from the abandonment — whether intentional or through the expiration of missed statutory or regulatory deadlines — of each of the twelve (12) pending patent applications currently residing in the dormant prosecution docket maintained by Calderwood & Harkness LLP ("C&H"). The analysis herein is intended to equip the Company's leadership with the information necessary to make informed triage decisions regarding the allocation of limited IP prosecution resources against a backdrop of severe budget constraints.
Context. The entire OWS patent prosecution docket was placed in dormant status on August 11, 2023, following the directive issued by Harborview Partners ("Veltrano Capital"), the Company's majority equity sponsor, under the cost-reduction initiative internally designated "Project Lighthouse." As part of that initiative, Veltrano Capital imposed a hard cap on discretionary intellectual property expenditures of $25,000 per quarter, effective for the fiscal quarters beginning Q3 2023. For context, the Company's quarterly patent prosecution spend at C&H alone averaged approximately $87,400 per quarter in the four quarters preceding the freeze (Q3 2022 through Q2 2023). The budget freeze has resulted in a near-total cessation of prosecution activity for approximately seventeen months.
Imminent Deadlines. The dormancy period has caused a dangerous accumulation of imminent and absolute prosecution deadlines across the portfolio. Multiple applications now face statutory deadlines that, if missed, will result in irreversible abandonment:
• Application A1 (U.S. App. No. 17/672,204): March 9, 2025 — This is an absolute, non-extendable deadline. All available extensions of time under 37 C.F.R. § 1.136(a) have been consumed. No further extensions are available. Failure to file a response to the pending Non-Final Office Action by this date will result in the automatic and irrevocable abandonment of this application.
• Application B1 (U.S. App. No. 17/814,057): April 21, 2025 — Extended Restriction Requirement response deadline.
• Application B3 (EP 23 741 682.3): May 17, 2025 — Response deadline to the Extended European Search Report.
• Applications A4 and A5 (PCT/US2023/010584 and PCT/US2023/010612): July 9, 2025 — National-phase entry deadline for additional jurisdictions beyond the European and Japanese phases already entered.
• Applications B4 and C3 (JP 2024-542197 and JP 2024-542305): January 9, 2026 — Three-year examination request deadline before the Japan Patent Office.
Companion Memoranda. This assessment is issued concurrently with, and should be read in conjunction with, the following companion memoranda prepared by C&H:
(a) Docket Status & Deadline Triage Memorandum, dated January 15, 2025, which provides the complete docket status report and traffic-light-coded deadline calendar;
(b) Budget Reactivation Proposal Memorandum, dated January 15, 2025, which sets forth the estimated costs for full and partial docket reactivation across multiple budget scenarios; and
(c) Lender Covenant Compliance Analysis, dated January 22, 2025 (i.e., of even date herewith), which provides a detailed analysis of the Company's obligations under Section 5.15 (Intellectual Property Covenants) of the Meridian National Bank, N.A. Revolving Credit Facility and the default risk associated with application abandonment.
Key Finding. The abandonment of Application A1 (U.S. App. No. 17/672,204) presents the single most consequential risk identified in this assessment. Abandonment of A1 would result in the irrevocable loss of the foundational claims covering OWS's tapered impedance-matching electrode design — the principal design-around feature distinguishing OWS's silicon-photonic Mach-Zehnder modulator technology from the blocking patent family held by Pinnacle Optics, Inc. ("Pinnacle"). The loss of these claims would leave OWS exposed to potential infringement assertions by Pinnacle with respect to OWS's core 800G and next-generation 1.6T data-center optical transceiver products, while simultaneously eliminating OWS's ability to assert defensive counter-claims or to negotiate a cross-license from a position of strength. This outcome is, in the assessment of the undersigned counsel, catastrophic for the Company's competitive position and must be avoided.
Portfolio Valuation Impact. According to the independent patent portfolio valuation report prepared by Graystone Valuation Advisors, LLC ("Graystone"), dated April 28, 2023, the Company's total patent portfolio was valued at $38.5 million in fair market value. Of that amount, approximately $12.2 million (representing approximately 31.7% of total portfolio value) was attributed to the twelve pending applications that are the subject of this assessment. The Graystone valuation was conducted under the assumption that all pending applications would be diligently prosecuted to issuance. Abandonment of all twelve pending applications would therefore destroy an estimated $12.2 million in portfolio value and reduce the total portfolio value to the $26.3 million attributed to the Company's thirty-one (31) issued U.S. utility patents alone — a reduction of nearly one-third.
Recommendation. Based on the analysis set forth herein, we strongly recommend that, at minimum, Applications A1 and B1 must be prioritized for immediate reactivation. The cost of responding to these two applications is estimated at $26,500 to $36,750, which, while exceeding the current Project Lighthouse quarterly cap, represents the absolute minimum expenditure necessary to avoid the most damaging near-term consequences of continued dormancy. Application B3 (the European regional-phase application) should be treated as a close secondary priority. Selective abandonment of lower-priority applications (most notably C3, the Japanese packaging application) may be considered if budget constraints remain binding, but any abandonment decision must be carefully weighed against the lender covenant implications under the Meridian National Bank Credit Facility, as detailed in the companion Lender Covenant Compliance Analysis.
II. Background
A. The Patent Application Family
The twelve pending applications that comprise the dormant docket all trace their priority, in whole or in part, to a single provisional application: U.S. Provisional App. No. 63/297,841, filed on January 10, 2022, by the Company's former patent prosecution counsel, Kessler & Morin LLP. The provisional application disclosed the foundational technology underlying OWS's next-generation silicon-photonic Mach-Zehnder modulator, including the core modulator architecture, the electrode fabrication processes, and the packaging and thermal management solutions developed by the Company's engineering team.
The provisional application expired by operation of law on January 10, 2023, twelve months after its filing date. The priority benefit of the provisional was preserved through timely non-provisional and PCT international filings made on January 9, 2023 — one day before the expiration of the provisional. C&H, which had assumed primary prosecution responsibility from Kessler & Morin effective October 1, 2022, was responsible for preparing and filing these applications under the engagement letter dated September 15, 2022.
The twelve pending applications are organized into three sub-families, each directed to a distinct aspect of the Company's silicon-photonic modulator technology:
Sub-Family A — Core Modulator Architecture (5 applications: A1 through A5). This sub-family covers the fundamental multi-channel silicon-photonic Mach-Zehnder modulator design, including the critical tapered impedance-matching electrode architecture that distinguishes OWS's technology from Pinnacle's blocking patents. Sub-Family A includes the foundational U.S. non-provisional application (A1), a continuation (A2), a continuation-in-part (A3), and two PCT international applications (A4, A5) from which European and Japanese national-phase entries have been made.
Sub-Family B — Electrode Fabrication Process (4 applications: B1 through B4). This sub-family covers the proprietary manufacturing methods and process steps used to fabricate the traveling-wave electrode structures used in OWS's modulator products. Sub-Family B includes a U.S. non-provisional application (B1), a planned but not-yet-filed divisional (B2), a European regional-phase application (B3), and a Japanese national-phase application (B4).
Sub-Family C — Packaging & Thermal Management (3 applications: C1 through C3). This sub-family covers the advanced packaging architectures and thermal management solutions developed for OWS's photonic integrated circuit (PIC) modules, particularly relevant to the trend toward co-packaged optics in high-bandwidth data-center interconnects. Sub-Family C includes a U.S. non-provisional application (C1), a European regional-phase application (C2), and a Japanese national-phase application (C3).
The named inventors common to most applications in the portfolio are: Dr. Rajan Menon (Chief Executive Officer and co-founder), Dr. Lena Strickland (Vice President of Engineering), Dr. Feng-Yi Chen (Principal Engineer), and Dr. Arjun Dasgupta (Senior Design Engineer). Dr. Menon and Dr. Strickland are named on all twelve applications. Dr. Chen is named on eleven of the twelve applications (all except C3). Dr. Dasgupta is named on nine applications (all of Sub-Family A and Sub-Family B).
B. Competitive Landscape and Pinnacle Optics Threat
Pinnacle Optics, Inc. ("Pinnacle"), headquartered at 7200 Gateway Boulevard, Newark, California 94560, is OWS's principal competitor in the silicon-photonics modulator segment of the data-center optical interconnect market. Pinnacle and OWS are the only two companies currently offering high-bandwidth silicon-photonic Mach-Zehnder modulators targeting the 800G and 1.6T data-rate segments for hyperscale data-center customers.
Pinnacle holds a blocking patent family that poses a significant threat to OWS's commercial operations. This family includes, at minimum, the following two issued U.S. utility patents:
• U.S. Patent No. 10,823,417, entitled "Silicon-Photonic Mach-Zehnder Modulator with Segmented Traveling-Wave Electrode," issued November 3, 2020.
• U.S. Patent No. 11,105,662, entitled "Method for Fabricating Segmented Traveling-Wave Electrode Structures for Silicon-Photonic Modulators," issued August 31, 2021.
Both patents are assigned to Pinnacle and are actively maintained. Pinnacle's outside patent counsel is the firm of Cavanaugh Holt & Sayer LLP, with Grant Sayer serving as Lead Partner on the Pinnacle IP portfolio. C&H's monitoring of USPTO records indicates that Pinnacle, through Cavanaugh Holt & Sayer, has pursued an aggressive prosecution strategy, including multiple continuation filings from the '417 patent family and at least two inter partes review petitions filed against third-party competitors.
The competitive threat posed by Pinnacle's patents is not speculative. C&H delivered a comprehensive freedom-to-operate ("FTO") analysis to OWS on October 14, 2022, which analyzed OWS's then-current and planned commercial products against the claims of the '417 and '662 patents. The FTO analysis concluded that OWS's commercial products face a "moderate-to-high" risk of infringement of the '417 patent absent the incorporation of design-around features — specifically, the tapered impedance-matching electrode geometry that forms the core subject matter of OWS's pending Sub-Family A claims. The FTO analysis further noted that the '662 patent's process claims present a secondary infringement risk with respect to OWS's electrode fabrication methods, though the risk was assessed as lower than the '417 patent risk due to certain process-step differences.
It is this FTO analysis that motivated the strategic decision to draft the claims in Applications A1, A2, and A3 to specifically claim around Pinnacle's electrode-segmentation geometry by specifying the distinct tapered impedance-matching feature. The pending claims in these applications are, in a very real sense, the Company's primary defensive shield against Pinnacle's patent assertions. Loss of these claims through abandonment would fundamentally alter the competitive dynamic between OWS and Pinnacle, to OWS's severe detriment.
Pinnacle's IP leadership, under Howard Raines (Vice President, intellectual Property), has exhibited a posture consistent with a willingness to enforce its patents aggressively. This assessment is informed by Pinnacle's prosecution history, its filing of IPR petitions, and industry intelligence regarding its licensing outreach to other participants in the silicon-photonics space.
C. IP Collateral and Lender Considerations
The Company's patent portfolio serves a dual function: it is both a competitive and commercial asset and a component of the collateral securing the Company's primary credit facility. Meridian National Bank, N.A. ("Meridian" or the "Lender") holds a first-priority security interest in all "Intellectual Property Collateral" as defined in the Loan and Security Agreement dated September 30, 2020 (as amended and restated on March 15, 2022, the "Credit Facility"). The definition of intellectual Property Collateral in Section 1.01 of the Credit Facility expressly includes "all patents, patent applications, and patent rights, whether now existing or hereafter acquired, together with all proceeds and products thereof."
Section 5.15 of the Credit Facility (Intellectual Property Covenants) imposes affirmative obligations on the Company with respect to its intellectual property assets. Among other things, Section 5.15 requires OWS to:
"maintain, preserve, and protect all Material intellectual Property, including by timely prosecuting all pending patent applications and paying all required maintenance fees, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect."
The phrase "Material intellectual Property" is defined in Section 1.01 and includes, broadly, all intellectual property that is "material to the business, financial condition, or operations of the Borrower." Given that the pending application family represents approximately 31.7% of the Company's total portfolio value and includes the claims most directly relevant to OWS's competitive positioning against Pinnacle, there is a strong argument — addressed in detail in the companion Lender Covenant Compliance Analysis — that at least the Sub-Family A and Sub-Family B applications constitute Material intellectual Property under the Credit Facility.
As of December 31, 2024, the Company had an outstanding balance of $32.5 million drawn under the $55 million Revolving Credit Facility. A covenant default under Section 5.15 could, depending on the Lender's exercise of its remedies, result in the acceleration of the outstanding balance — a financial event that would be existential for the Company given its current financial performance. The detailed analysis of covenant default risk is provided in the separate memorandum of even date; this assessment focuses primarily on the commercial, competitive, and strategic consequences of abandonment but references the lender covenant implications where relevant.
D. Portfolio Valuation Reference
In the first quarter of 2023, Harborview Partners engaged Graystone Valuation Advisors, LLC ("Graystone") to conduct an independent valuation of OWS's entire patent portfolio. The engagement was led by Rebecca Thornton, Partner at Graystone, who served as Lead Engagement Partner. The resulting valuation report, dated April 28, 2023 (the "Graystone Report"), concluded that the total fair market value of OWS's patent portfolio was $38.5 million, broken down as follows:
• Issued patents (31 U.S. utility patents): $26.3 million
• Pending application family (12 applications across three sub-families): $12.2 million
The pending applications thus represent approximately 31.7% of the total portfolio value as determined by Graystone. The Graystone Report employed a combination of income-based and market-based valuation methodologies, including a discounted cash flow analysis of projected licensing revenue and a comparable-transaction analysis based on recent silicon-photonics IP transactions. Notably, the Graystone valuation was conducted under the explicit assumption that all twelve pending applications would be diligently prosecuted to issuance within standard prosecution timelines. The report contains a caveat that the valuation is conditioned on the continued prosecution of the pending applications, and that abandonment of any material portion of the pending family would require a revaluation of the portfolio.
The per-application value attributions from the Graystone Report are referenced throughout Section IV of this memorandum and are summarized in the Risk Matrix at Section VI. Relevant excerpts from the Graystone Report are included in Appendix C for ease of reference.
III. Analytical Framework
In assessing the consequences of abandonment for each of the twelve pending applications, we have evaluated each application against a consistent set of seven analytical factors. These factors are designed to capture the full spectrum of commercial, legal, competitive, financial, and strategic considerations relevant to the abandonment decision. The factors are as follows:
1. Claim Scope and Technical Coverage. This factor examines the specific subject matter covered by the pending claims of the application, the breadth and strength of the independent claims, and the relationship between the claimed subject matter and OWS's current and planned commercial products. OWS's principal commercial products are 800G data-center optical transceivers incorporating silicon-photonic Mach-Zehnder modulators, with next-generation 1.6T transceivers in active development. The closer the claim scope to the core commercial technology, the greater the consequence of abandonment.
2. Competitive Positioning / Pinnacle Exposure. This factor evaluates whether the application's claims provide design-around protection or defensive leverage against Pinnacle Optics, Inc. and its blocking patent family (U.S. Patent Nos. 10,823,417 and 11,105,662). Applications whose claims are specifically drafted to establish freedom-to-operate with respect to Pinnacle's patents, or that would provide OWS with counter-assertion capability in the event of Pinnacle patent litigation, receive heightened weighting under this factor.
3. Commercial Relevance. This factor assesses the alignment of the application's subject matter with OWS's product roadmap, market positioning within the silicon-photonics interconnect space, and the geographic and customer markets in which patent protection would provide meaningful commercial advantage. This factor considers both current product lines and the Company's forward-looking technology development trajectory as communicated to C&H by the engineering team.
4. Replaceability. This factor is critically important. It addresses whether the claim scope that would be lost through abandonment can be obtained through alternative filing strategies — such as new non-provisional applications, continuations from surviving applications, or new PCT filings — or whether the claim scope is irrevocably lost upon abandonment. The key consideration is the availability of priority dates: because the foundational Provisional App. No. 63/297,841 expired on January 10, 2023, any new filing that does not claim priority through an existing pending application would be subject to all intervening prior art published after January 10, 2022, potentially including Pinnacle's own continuation filings and OWS's own published applications (which, once published, constitute prior art against the Company's later filings under certain circumstances).
5. Lender Covenant Impact. This factor evaluates whether abandonment of the particular application may implicate the Company's obligations under Section 5.15 (Intellectual Property Covenants) of the Meridian National Bank Credit Facility. The detailed analysis is provided in the companion Lender Covenant Compliance Analysis memorandum; this factor provides a cross-reference and high-level assessment of whether the application is likely to be deemed "Material intellectual Property" under the Credit Facility.
6. Estimated Value Contribution. This factor provides the proportional value attribution for each application from the Graystone $12.2 million pending-family valuation. These values are estimates based on C&H's review of the Graystone Report's methodology and allocation tables (see Appendix C) and should be treated as indicative rather than precise.
7. Interdependencies. This factor examines the relationship of each application to other applications in the family — including parent/child relationships in continuation chains, CIP chains, PCT national-phase branching, and divisional filing dependencies. Abandonment of a parent application may have cascading consequences for dependent applications that extend beyond the direct loss of the parent's claim scope.
Each application is assigned an overall Abandonment Risk Rating on the following scale:
• CRITICAL: Abandonment would cause irreparable harm to the Company's competitive position, core patent protection, or financial standing. Abandonment must be avoided under all circumstances.
• HIGH: Abandonment would result in significant loss of patent protection, competitive leverage, or portfolio value. Abandonment is strongly discouraged and should occur only if necessitated by extreme budget constraints and after exhausting all other options.
• MODERATE: Abandonment would result in a meaningful but non-catastrophic loss of patent rights or portfolio value. The decision to abandon should be made deliberately and with full consideration of the specific commercial context.
• LOW: Abandonment would result in a limited loss of patent rights or portfolio value. The application may be a candidate for strategic abandonment if budget constraints require sacrifice.
IV. Application-by-Application Analysis
A. Sub-Family A — Core Modulator Architecture
Sub-Family A comprises five applications directed to the fundamental multi-channel silicon-photonic Mach-Zehnder modulator architecture, including the tapered impedance-matching electrode feature that is the principal design-around distinguishing OWS's technology from Pinnacle's blocking patents. This sub-family contains the most commercially and strategically significant applications in the portfolio.
1. Application A1 — U.S. App. No. 17/672,204. Type: U.S. Non-Provisional Utility Application (filed January 9, 2023)
Title: "Multi-Channel Silicon-Photonic Mach-Zehnder Modulator with Segmented Traveling-Wave Electrode Architecture"
Priority: Claims benefit of U.S. Provisional App. No. 63/297,841 (filed January 10, 2022)
Named Inventors: Dr. Rajan Menon, Dr. Lena Strickland, Dr. Feng-Yi Chen, Dr. Arjun Dasgupta
Current Status: A Non-Final Office Action was mailed by the USPTO on March 7, 2024. The initial three-month response deadline was June 7, 2024. A two-month extension of time was purchased on September 6, 2023, at a cost of $1,178 (small-entity rate), extending the response deadline to August 7, 2024. A further one-month extension was purchased on August 5, 2024, under emergency authorization from Sandra Koh, extending the deadline to September 7, 2024. An additional three-month extension was subsequently purchased on September 5, 2024, again under emergency authorization, extending the deadline to December 7, 2024. A final one-month extension was purchased on December 5, 2024, extending the deadline to the absolute statutory maximum: March 9, 2025 (accounting for the six-month maximum extension period and the two additional days resulting from the original deadline falling on a Saturday). All available extensions of time under 37 C.F.R. § 1.136(a) have been consumed. The total six-month extension period from the original three-month response period has been fully utilized.
Next Deadline: March 9, 2025 — ABSOLUTE. No further extensions of time are available under 37 C.F.R. § 1.136(a). This deadline cannot be extended by any mechanism. Failure to file a complete and proper response to the Non-Final Office Action by this date will result in the automatic abandonment of Application A1 by operation of law.
Abandonment Consequence — CRITICAL:
Application A1 is the foundational non-provisional application of the entire patent family. It is the parent application from which Application A2 (continuation) and Application A3 (continuation-in-part) derive their priority chains. It contains the broadest independent claims in the portfolio, covering the core silicon-photonic Mach-Zehnder modulator architecture with the tapered impedance-matching electrode feature.
The significance of A1's claims cannot be overstated. The tapered impedance-matching feature is the principal technological and legal distinction between OWS's modulator design and the segmented traveling-wave electrode claimed in Pinnacle's '417 and '662 patents. The claims in A1 were drafted by C&H specifically to establish a patent position that would provide OWS with freedom-to-operate with respect to Pinnacle's blocking patents, while simultaneously creating a defensive patent asset that OWS could assert in cross-license negotiations or counter-claims if Pinnacle were to initiate patent litigation.
Claim Scope and Technical Coverage. A1's independent claims are directed to the multi-channel modulator architecture at the highest level of generality, specifying the tapered impedance-matching electrode structure as a required element. The claims cover both the device structure and the method of operating the modulator to achieve broadband impedance matching across multiple modulator channels. This claim scope encompasses OWS's current 800G transceiver products and is expected to cover the planned 1.6T transceiver products that are in active development. The Non-Final Office Action raised rejections based on a combination of prior art references, none of which teach or suggest the tapered impedance-matching feature in the manner claimed. The incomplete draft response prepared by Christy Bauer through August 2023 included proposed claim amendments and arguments to overcome the rejections while preserving the broadest reasonable claim scope, with particular emphasis on the tapered impedance-matching feature as the point of distinction over both the cited prior art and Pinnacle's patents.
Competitive Positioning / Pinnacle Exposure. The loss of A1's claims would be devastating to OWS's competitive position vis-à-vis Pinnacle. Without issued or pending claims covering the tapered impedance-matching design-around, OWS would have no patent-based defensive leverage against Pinnacle's assertion of its '417 and '662 patents. The October 14, 2022 FTO analysis concluded that OWS's products face "moderate-to-high" infringement risk absent the design-around features; loss of the pending claims that define those design-around features would leave OWS with no affirmative patent position to counterbalance Pinnacle's assertions. Furthermore, Pinnacle's retention of Cavanaugh Holt & Sayer LLP (Grant Sayer, Lead Partner) — a firm known for aggressive patent enforcement — and the apparent IP leadership of Howard Raines (Pinnacle VP, intellectual Property) suggest that the risk of Pinnacle assertion is not merely theoretical. In the event of Pinnacle litigation, OWS would be unable to assert counter-claims or negotiate from a position of mutual vulnerability, dramatically weakening OWS's negotiating leverage and increasing the likely cost of resolution (whether through settlement, license, or adverse judgment).
Commercial Impact. OWS's current and next-generation 800G and 1.6T data-center optical transceiver products incorporate the tapered impedance-matching modulator design that is the subject of A1's claims. These products represent the core of OWS's revenue stream. Loss of patent protection for the defining feature of these products leaves the core product line commercially exposed — not only to Pinnacle's patent assertions but also to potential future competitors who could freely adopt the tapered impedance-matching design without risk of OWS patent enforcement.
Replaceability. A1's claim scope is practically irreplaceable. Because the foundational Provisional App. No. 63/297,841 expired on January 10, 2023, any new non-provisional application filed after the abandonment of A1 would not be able to claim the benefit of the January 10, 2022 provisional filing date. The new application would be subject to all prior art published or filed between January 10, 2022 and the new filing date, which could include Pinnacle's own continuation filings, third-party publications, and — critically — OWS's own published applications (A1 was published as U.S. Patent Application Publication No. 2024/0152774 on May 9, 2024, and would constitute prior art against a new OWS filing lacking the earlier priority date). The practical effect is that the claim scope of A1 would be extremely difficult, if not impossible, to replicate in a new filing.
Lender Covenant Impact. A1 is almost certainly "Material intellectual Property" under the Meridian Credit Facility. Its abandonment would constitute a failure to "timely prosecute" a pending patent application in violation of Section 5.15. The companion Lender Covenant Compliance Analysis addresses this risk in detail.
Estimated Value Contribution. A1 is the largest single contributor to the Graystone $12.2 million pending-family valuation. Based on C&H's review of the Graystone allocation methodology, we estimate A1's value contribution at approximately $3.5 million to $4.5 million.
Interdependencies. A1 is the parent of A2 (continuation, U.S. App. No. 17/672,311) and A3 (CIP, U.S. App. No. 17/672,489). While A2 and A3 are separately filed applications and would not themselves be automatically abandoned upon the abandonment of A1, the loss of A1's claim scope — which includes the broadest independent claims — would significantly diminish the overall protection afforded by the family. Moreover, A3's claim to priority for its shared subject matter (i.e., the subject matter common to A1 and A3) flows through A1's priority chain; while A3's separately filed status should preserve its own filing date, the interplay between A1's prosecution history and A3's claims would need to be carefully managed.
Estimated Cost to Respond. We estimate the cost to complete and file the response to the Non-Final Office Action at $22,000 to $30,000, reflecting approximately 40 to 55 attorney hours (including completion of the draft response by Christy Bauer, partner review by Catherine Bloom, inventor consultation with Dr. Menon and/or Dr. Chen, and preparation of formal amendments and remarks) plus USPTO fees. If a Request for Continued Examination ("RCE") is required (e.g., if a Final Office Action issues after the response), the additional USPTO RCE fee is approximately $2,000 at the small-entity rate. The draft response prepared through August 2023 provides a substantial head start, but it will require updating to reflect any developments in the prior art landscape and finalization of the proposed claim amendments.
ABANDONMENT RISK RATING: CRITICAL — DO NOT ABANDON
2. Application A2 — U.S. App. No. 17/672,311. Type: U.S. Continuation (of A1; filed March 15, 2023)
Title: "Multi-Channel Silicon-Photonic Mach-Zehnder Modulator with Segmented Traveling-Wave Electrode Architecture" (same title as A1; claims directed to specific embodiments)
Priority: Through A1 to Provisional App. No. 63/297,841 (January 10, 2022 priority date)
Named Inventors: Dr. Rajan Menon, Dr. Lena Strickland, Dr. Feng-Yi Chen, Dr. Arjun Dasgupta
Current Status: Application filed and pending; no Office Action received to date. Based on current USPTO examination timelines for Art Unit 2878, the first Office Action is estimated to issue in Q2 2025 (approximately April through June 2025).
Next Deadline: No imminent statutory deadline. The first substantive deadline will arise upon receipt of the first Office Action, which will trigger a three-month initial response period (extendable up to six months).
Abandonment Consequence — HIGH:
A2 is a continuation of A1 and contains claims directed to narrower, more specific embodiments of the core modulator architecture — in particular, claims reciting specific modulator channel configurations, channel-count arrangements, and modulator array geometries that correspond to OWS's specific product configurations. While the independent claims of A1 provide the broadest protection, A2's narrower claims provide strategic depth in the portfolio. Multiple overlapping claim sets across the core architecture increase the Company's licensing leverage (by providing multiple patents that a potential licensee must address), enhance defensive coverage (by providing fallback claims if broader claims are narrowed or invalidated during prosecution or litigation), and complicate an adversary's design-around efforts.
Replaceability. A2's claim scope is partially replaceable. If A1 is maintained as a pending application, new continuation filings from A1 could potentially regenerate claims similar to those in A2, albeit with additional prosecution cost, delay, and the risk of prosecution history estoppel arising from the prosecution of A1. However, if A1 is abandoned, the ability to file continuations from A1 is extinguished, and the January 10, 2022 priority date would no longer be available for new filings — making A2 effectively irreplaceable in that scenario.
Competitive Positioning. A2's narrower claims are less directly tied to the design-around narrative than A1's broader claims, but they contribute to the overall portfolio strength that supports OWS's negotiating position vis-à-vis Pinnacle. In a cross-licensing scenario, multiple issued patents across the core technology increase the aggregate royalty burden that Pinnacle would face, improving OWS's leverage.
Estimated Value Contribution. Approximately $1.0 million to $1.5 million.
Lender Covenant Impact. The lender covenant implications of abandoning A2 are less acute than for A1, given A2's narrower scope, but A2 is part of the same core technology family and may be encompassed within the definition of Material intellectual Property.
ABANDONMENT RISK RATING: HIGH
3. Application A3 — U.S. App. No. 17/672,489. Type: U.S. Continuation-in-Part (of A1; filed June 22, 2023)
Title: "Silicon-Photonic Mach-Zehnder Modulator with Advanced Tapered Impedance-Matching Electrode Geometries"
Priority: Partially claims benefit of Provisional App. No. 63/297,841 (January 10, 2022 priority date) for subject matter shared with A1. New matter disclosed in A3 has an effective filing date of June 22, 2023.
Named Inventors: Dr. Rajan Menon, Dr. Lena Strickland, Dr. Feng-Yi Chen, Dr. Arjun Dasgupta
Current Status: Application filed and pending; no Office Action received to date. Based on current USPTO examination timelines, the first Office Action is estimated to issue in Q3 2025 (approximately July through September 2025).
Next Deadline: No imminent statutory deadline.
Abandonment Consequence — HIGH:
A3 occupies a uniquely important position within the portfolio as both a continuation-in-part of A1 and a vehicle for claiming advanced variants of the tapered impedance-matching feature. The new matter in A3 reflects refined electrode tapering geometries developed by Dr. Feng-Yi Chen and Dr. Arjun Dasgupta in early 2023 — improvements to the foundational tapered impedance-matching design that were made after the filing of the provisional application and that therefore could not be claimed in A1 or A2.
Claim Scope and Technical Coverage. A3's claims are specifically drafted to provide a secondary layer of design-around protection. If A1's claims are narrowed during prosecution — for example, through claim amendments required to overcome prior art rejections — A3's CIP claims provide fallback coverage for the advanced tapering geometries that may not be within the narrowed scope of A1's claims. This layered approach is a deliberate prosecution strategy designed to maximize the likelihood that OWS will ultimately obtain issued claims that cover its commercial products' impedance-matching features, even if any individual application encounters prosecution difficulties.
Competitive Positioning. The October 2022 FTO claim chart analysis identified A3's CIP claims as providing the clearest and most unambiguous distinction from the claim limitations of Pinnacle's '417 patent. The advanced tapering geometries claimed in A3 are sufficiently different from Pinnacle's segmented electrode design that they would be expected to survive any attempt by Pinnacle to argue equivalents or doctrine-of-equivalents infringement.
Replaceability. The replaceability of A3's claim scope is limited. The new matter in the CIP has an effective filing date of June 22, 2023; a new application covering the same subject matter could theoretically be filed, but it would not benefit from the earlier January 10, 2022 priority date for the shared subject matter. Moreover, the ability to file a CIP claiming priority to A1 depends on A1 remaining a pending application. If A1 is abandoned before a new CIP is filed, the priority chain is broken for the shared subject matter, and the new filing would be treated as an entirely new application with respect to the shared disclosure.
Estimated Value Contribution. Approximately $1.5 million to $2.0 million.
Interdependencies. A3 derives its priority chain for shared subject matter through A1. If A1 is maintained, A3's priority position is secure. If A1 is abandoned, A3's own filing date (June 22, 2023) remains in effect, but the earlier priority date for the shared subject matter is jeopardized.
ABANDONMENT RISK RATING: HIGH
4. Application A4 — PCT/US2023/010584. Type: PCT International Application (filed January 9, 2023, with USPTO as Receiving Office)
Title: "Multi-Channel Silicon-Photonic Mach-Zehnder Modulator with Segmented Traveling-Wave Electrode Architecture"
Priority: Claims benefit of Provisional App. No. 63/297,841 (January 10, 2022 priority date)
Named Inventors: Dr. Rajan Menon, Dr. Lena Strickland, Dr. Feng-Yi Chen, Dr. Arjun Dasgupta
Current Status: International phase is complete. The International Search Report and Written Opinion (Chapter I) were issued by the International Searching Authority (USPTO) on July 14, 2023. National-phase entries have already been made for the European Patent Office (resulting in Application B3, EP 23 741 682.3) and the Japan Patent Office (resulting in Application B4, JP 2024-542197). No additional national-phase entries have been made.
Next Deadline: July 9, 2025 — This is the expiration of the 30-month national-phase entry period (calculated from the January 10, 2022 priority date). After this date, national-phase entry in any additional jurisdiction (e.g., People's Republic of China, Republic of Korea, India, Taiwan, or others) will be permanently foreclosed under this PCT application.
Abandonment Consequence — MODERATE:
The PCT application itself has served its primary function: it has preserved the right to enter the national phase in multiple jurisdictions and has been used as the vehicle for the EP and JP national-phase entries (Applications B3 and B4, respectively). The PCT shell application has no independent legal effect beyond enabling national-phase entries; it does not itself mature into a patent.
The relevant question for A4 is whether OWS intends to enter the national phase in additional jurisdictions beyond Europe and Japan. The most commercially significant jurisdictions that remain available are:
• People's Republic of China (CNIPA): The Chinese data-center market is substantial and growing rapidly. China is home to several of the world's largest hyperscale data-center operators and is a significant manufacturing base for optical transceiver modules. Patent protection in China would provide OWS with enforcement capability against Chinese competitors and would strengthen the Company's position in any licensing discussions with Chinese OEMs.
• Republic of Korea (KIPO): South Korea's semiconductor manufacturing ecosystem is among the world's most advanced, and Korean companies are active participants in the silicon-photonics supply chain. Patent protection in Korea would be relevant to OWS's relationships with Korean component suppliers and potential licensing partners.
• India, Taiwan, and others: These jurisdictions may be of secondary commercial relevance depending on OWS's specific customer base and manufacturing relationships.
If OWS does not intend to pursue patent protection in these additional jurisdictions, allowing the July 9, 2025 deadline to pass has no further legal consequence — the EP and JP phases (B3 and B4) are already independently pending proceedings and are unaffected by the PCT application's status. However, if OWS later determines that China or South Korea are commercially important for silicon-photonics patent protection, the failure to enter the national phase by July 9, 2025 permanently forecloses those jurisdictions under this application and with this priority date. No later filing can recapture the January 10, 2022 priority date.
Estimated Value Contribution. The value of the PCT shell itself is marginal; the value resides in the unexercised national-phase options. We estimate the value of the China and Korea options at approximately $0.5 million to $1.0 million in the aggregate.
Cost to Enter Additional National Phases. National-phase entry in China would cost approximately $8,000 to $12,000 (including translation, filing fees, and local counsel engagement). Korea would cost approximately $6,000 to $9,000. These costs would need to be budgeted in addition to ongoing prosecution costs in those jurisdictions.
We recommend that the Company provide a geographic revenue and customer analysis to inform the national-phase entry decision before the July 9, 2025 deadline.
ABANDONMENT RISK RATING: MODERATE (depends on geographic strategy)
5. Application A5 — PCT/US2023/010612. Type: PCT International Application (filed January 9, 2023, with USPTO as Receiving Office)
Title: "Packaging and Thermal Management System for Silicon-Photonic Integrated Circuit Modules"
Priority: Claims benefit of Provisional App. No. 63/297,841 (January 10, 2022 priority date)
Named Inventors: Dr. Rajan Menon, Dr. Lena Strickland, Dr. Feng-Yi Chen
Current Status: International phase is complete. The Chapter I (ISR/WO) report was issued on August 2, 2023. National-phase entries have been made for the EPO (resulting in Application C2, EP 23 765 901.7) and the JPO (resulting in Application C3, JP 2024-542305). No additional national-phase entries have been made.
Next Deadline: July 9, 2025 — Same 30-month national-phase entry deadline as A4 (both applications claim the same January 10, 2022 priority date).
Abandonment Consequence — MODERATE:
The analysis for A5 largely mirrors that of A4. The PCT shell has served its primary function in enabling EP and JP national-phase entries. The remaining value lies in the option to enter additional national phases (China, Korea, and others) for the packaging and thermal management technology covered by Sub-Family C.
The commercial case for national-phase entry of the packaging/thermal management technology in additional jurisdictions is somewhat weaker than for the core modulator technology (A4), as the packaging technology is less directly tied to the Pinnacle competitive threat and is at an earlier stage of commercial deployment. However, as the industry moves toward co-packaged optics for 1.6T and beyond, the value of packaging IP in major markets may increase.
Estimated Value Contribution. Approximately $0.3 million to $0.5 million for unexercised national-phase options.
The decision on additional national-phase entries for A5 should be coordinated with the A4 analysis and made as part of a unified geographic IP strategy.
ABANDONMENT RISK RATING: MODERATE
B. Sub-Family B — Electrode Fabrication Process
Sub-Family B comprises four applications directed to OWS's proprietary electrode fabrication processes — the manufacturing methods and process steps used to produce the traveling-wave electrode structures that are a key component of OWS's silicon-photonic modulator products. Process patents are strategically valuable because they protect against competitors who may reverse-engineer OWS's fabrication methods and replicate its manufacturing capabilities, even if the competitor's final product is designed to avoid infringement of device-structure claims.
6. Application B1 — U.S. App. No. 17/814,057. Type: U.S. Non-Provisional Utility Application (filed July 21, 2023)
Title: "Methods for Fabricating Traveling-Wave Electrode Structures for Silicon-Photonic Modulators"
Priority: Claims benefit of Provisional App. No. 63/297,841 (January 10, 2022 priority date) through the non-provisional filing date of July 21, 2023. The application also includes subject matter that was disclosed in the provisional.
Named Inventors: Dr. Rajan Menon, Dr. Lena Strickland, Dr. Feng-Yi Chen, Dr. Arjun Dasgupta
Current Status: A Restriction Requirement was mailed by the USPTO on June 18, 2024, requiring election among three identified invention groups: Group I (traveling-wave electrode deposition and patterning process), Group II (electrode tapering process), and Group III (multi-layer electrode stack fabrication process). The initial two-month response period was August 18, 2024. A four-month extension of time was purchased on October 18, 2024, at a cost of $2,560 (small-entity rate), under emergency authorization from Sandra Koh. The extended response deadline is April 21, 2025.
Next Deadline: April 21, 2025 — Response to Restriction Requirement (with purchased extension).
Abandonment Consequence — HIGH:
B1 covers the electrode fabrication process — the manufacturing methodology for OWS's proprietary traveling-wave electrode structures. Process claims are a critical complement to the device-structure claims of Sub-Family A. While device claims protect the product itself, process claims protect the method of making the product. A competitor that copies OWS's fabrication process would infringe the process claims even if the resulting product is designed to technically avoid the device claims. Process patents are also valuable in trade-secret disputes and in licensing negotiations, as they demonstrate that OWS possesses proprietary manufacturing know-how that merits compensation.
Interdependencies. B1 is the parent application for the anticipated B2 divisional filing. The Restriction Requirement identifies three distinct invention groups; OWS must elect one group for prosecution in B1, and the non-elected groups would be preserved by filing one or more divisional applications (B2) from B1 while B1 remains pending. If B1 is abandoned before the restriction response is filed, or before a divisional is filed, the ability to claim the non-elected groups is permanently lost. Abandonment of B1 therefore has a cascading effect — it eliminates both B1's elected claims and all future B2 divisional claims.
Cost to Respond. The response to a Restriction Requirement is among the most straightforward prosecution actions available. It requires an election among the identified groups, typically accompanied by a brief traversal of the requirement (to preserve the right to petition if the restriction was improper). We estimate the cost at approximately $4,500 to $6,750, reflecting 8 to 12 attorney hours and no USPTO fee (the restriction response itself does not require a fee; the extension fee has already been paid). This is an exceptionally cost-effective action to preserve both B1 and the future B2 divisional.
Commercial Relevance. OWS's electrode fabrication process is proprietary and represents a significant competitive advantage. The fabrication methods embodied in B1's claims are used in the production of all of OWS's current transceiver products and are expected to be used in next-generation products. Process patents in this area would provide OWS with enforcement capability against competitors — particularly any competitor that hires away OWS engineering personnel or otherwise acquires knowledge of OWS's proprietary fabrication methods.
Estimated Value Contribution. Approximately $1.5 million to $2.0 million.
Replaceability. A new application covering the same fabrication processes could theoretically be filed, but it would have a filing date no earlier than the date of the new filing, losing the January 10, 2022 priority date and the July 21, 2023 filing date of B1. Any intervening prior art — including OWS's own published applications and any publications or filings by competitors — could be cited against the new application.
We recommend electing Group I (traveling-wave electrode deposition and patterning process) as the most commercially relevant fabrication process variant, with a divisional to be filed for Groups II and III upon budget authorization.
ABANDONMENT RISK RATING: HIGH
7. Application B2 — U.S. Divisional (of B1; Placeholder — Not Yet Filed). Type: Planned U.S. Divisional Application (to be filed upon election/restriction in B1)
Current Status: Placeholder only. B2 has not yet been filed. Filing of B2 is contingent on the filing of the restriction response in B1 (electing one invention group) and the subsequent filing of a divisional application directed to the non-elected invention group(s).
Next Deadline: B2 cannot be filed until the restriction response is filed in B1. The divisional must be filed while B1 remains pending; there is no independent statutory deadline for B2 beyond the pendency of B1.
Abandonment Consequence — MODERATE (contingent on B1):
B2 cannot exist independently of B1. It is entirely dependent on B1's maintenance and on the filing of the restriction response. If B1 is maintained and the restriction response is filed, B2 would be filed covering the non-elected invention group(s) — likely Groups II and III (electrode tapering process and multi-layer electrode stack fabrication process, respectively).
B2's value is therefore derivative of B1's value. It contributes to the breadth of OWS's claim portfolio in the electrode fabrication space, providing coverage for manufacturing process variants that are not encompassed by the elected group in B1. The non-elected groups cover distinct process steps that may be independently valuable — for example, the electrode tapering process (Group II) is directly related to the tapered impedance-matching feature that is central to OWS's design-around strategy.
Estimated Value Contribution. Approximately $0.5 million to $0.8 million (incremental to B1).
Practical Recommendation. If B1 is maintained and the restriction response is filed (which we strongly recommend), B2 should be filed as a divisional promptly thereafter to preserve the non-elected claims. However, if budget is severely constrained, the divisional filing can be deferred — the only requirement is that it be filed before B1 issues as a patent or is abandoned. The filing fee for a divisional application is approximately $800 (small entity) plus attorney fees of approximately $3,000 to $5,000 for preparation.
ABANDONMENT RISK RATING: MODERATE (entirely dependent on B1 outcome)
8. Application B3 — EP 23 741 682.3. Type: European regional-phase application (entered from PCT A4, PCT/US2023/010584)
Title: "Multi-Channel Silicon-Photonic Mach-Zehnder Modulator with Segmented Traveling-Wave Electrode Architecture"
Priority: Claims benefit of Provisional App. No. 63/297,841 (January 10, 2022 priority date) through PCT A4.
Current Status: An Extended European Search Report ("EESR") was received from the European Patent Office on November 17, 2023. The EESR includes a search opinion and identifies relevant prior art, together with communications under EPO Rules 70a, 161, and 162. A response to the EESR is required.
Next Deadline: May 17, 2025 — This is the six-month deadline for responding to the EESR under the relevant EPO rules (calculated from the deemed notification date of the EESR). Failure to file a timely response will result in the deemed withdrawal of the application under the European Patent Convention, and European patent protection on this technology with the January 10, 2022 priority date would be permanently lost.
Foreign Associate: Application B3 is handled by foreign associate Breitenfeld & Vogt Patentanwälte PartGmbB (Dr. Matthias Vogt, Leopoldstrasse 44, 80802 Munich, Germany). B&V has been on hold per C&H's instruction of September 20, 2023, and will require reactivation and instruction from C&H to prepare and file the EESR response.
Abandonment Consequence — HIGH:
B3 provides European patent protection for both the core modulator architecture and the electrode fabrication process claimed in the PCT parent application. The European data-center market is substantial, and European original equipment manufacturers (OEMs) and system integrators represent a significant segment of OWS's customer base and potential licensing partners. Major European data-center operators and telecommunications companies are actively deploying 800G optical interconnect technology, and the European market for silicon-photonic transceiver modules is projected to grow substantially as 1.6T technology enters commercial deployment.
Failure to respond to the EESR by May 17, 2025 would result in the deemed withdrawal of B3 under EPC rules. Unlike the USPTO, the EPO does not provide a straightforward mechanism for petitioning to revive a deemed-withdrawn application on the basis of unintentional delay. While limited restoration options exist under the EPC (e.g., further processing under Article 121 EPC or re-establishment of rights under Article 122 EPC), these remedies are narrowly available and uncertain in outcome. The prudent course is to treat the May 17, 2025 deadline as effectively absolute.
Estimated Cost to Respond. We estimate the total cost at approximately $15,000 to $22,000, broken down as follows:
• C&H fees (review of EESR, preparation of response strategy, drafting of amended claims and arguments, coordination with B&V): $11,250 to $16,875 (20 to 30 attorney hours at blended rate)
• Breitenfeld & Vogt fees (local filing, translation of amendments, EPO correspondence): €3,500 to €5,000
• EPO examination fee (if not yet paid): approximately €580
Estimated Value Contribution. Approximately $1.0 million to $1.5 million.
Replaceability. A new European filing would be possible only through a new PCT application or a direct EP filing, but the January 10, 2022 priority date would be permanently lost. The new filing would be subject to all intervening prior art, including European prior art published between January 2022 and the new filing date. Given the two-plus year gap and the pace of publication in the silicon-photonics field, the intervening art risk is significant.
ABANDONMENT RISK RATING: HIGH
9. Application B4 — JP 2024-542197. Type: Japanese national-phase application (entered from PCT A4, PCT/US2023/010584)
Title: (Japanese translation of A4 title; covers modulator architecture and electrode fabrication)
Priority: Claims benefit of Provisional App. No. 63/297,841 (January 10, 2022 priority date) through PCT A4.
Current Status: National-phase entry completed July 3, 2023. The application is currently awaiting an examination request. Under Japanese patent law, an examination request must be filed within three years of the PCT international filing date (January 9, 2023) to avoid deemed withdrawal. The application is currently on hold at the Japan Patent Office, pending OWS's filing of the examination request.
Next Deadline: January 9, 2026 — Three-year examination request deadline, calculated from the PCT international filing date of January 9, 2023.
Foreign Associate: Application B4 is handled by foreign associate Nakashima & Togawa Patent Professional Corporation (Kenji Nakashima, 2-4-16 Toranomon, Minato-ku, Tokyo 105-0001, Japan). Currently on hold per C&H instruction of September 20, 2023.
Abandonment Consequence — MODERATE:
B4 provides Japanese patent protection for the modulator architecture and electrode fabrication technology. Japan is relevant to OWS's patent strategy due to the presence of significant Japanese semiconductor equipment and component manufacturers in the photonics supply chain, including companies that may be potential licensing partners, supply-chain collaborators, or competitors.
The January 9, 2026 deadline is the furthest out of all imminent deadlines in the portfolio, providing the most flexibility for decision-making. The cost of filing the examination request is relatively modest — approximately $3,000 to $5,000 total (including JPO examination request fee of approximately ¥150,000, local counsel fees, and any necessary communication costs). No substantive prosecution work is required at this stage; the examination request is an administrative filing.
Estimated Value Contribution. Approximately $0.3 million to $0.5 million.
Replaceability. A Japanese filing with the January 10, 2022 priority date would be permanently lost if the examination request deadline passes without action. A new Japanese filing would require a new PCT or direct JP filing and would be subject to intervening prior art.