1032-00001 · Client 1032 · Pleadings

answer-to-complaint.docx DOCUMENT Antitrust

8 / 12 ← → ✕

IN THE CIRCUIT COURT OF THE STATE OF OREGON FOR THE COUNTY OF MULTNOMAH

ANSWER OF DEFENDANT HALCYON SEMICONDUCTOR AMERICAS INC. TO COMPLAINT

Defendant Halcyon Semiconductor Americas Inc. ("Halcyon Americas" or "Defendant"), a Delaware corporation with its principal place of business at 4500 Great America Parkway, Suite 300, Santa Clara, California 95054, Employer Identification Number 84-3921057, by and through its undersigned counsel, Calderwood & Harkness LLP and Grantham Davis & Kowalski LLP, hereby answers the Complaint filed by the State of Oregon, by and through Attorney General Diane Calloway (the "Complaint"), on April 17, 2023, and states as follows. Except as expressly admitted herein, Defendant denies each and every allegation contained in the Complaint, including all introductory paragraphs, headings, characterizations, conclusions of law, and requests for relief. Defendant further reserves the right to amend this Answer and to assert additional affirmative or other defenses as may become apparent through discovery or further investigation of the facts and applicable law.

I. RESPONSES TO ALLEGATIONS IN THE COMPLAINT

A. Response to Introduction and Summary of Action (Complaint ¶¶ 1–8)

1. Paragraph 1. Defendant admits that this action was brought by the State of Oregon, by and through Attorney General Diane Calloway, and that the Complaint purports to challenge the acquisition of Meridian Photonics Inc. by Halcyon Semiconductor Americas Inc. Defendant denies the Complaint's characterization that the transaction at issue is unlawful, anticompetitive, or in violation of Oregon law. To the extent the remaining allegations in Paragraph 1 constitute legal conclusions, no response is required; to the extent a response is deemed required, Defendant denies such allegations.

2. Paragraph 2. Defendant admits that the Complaint purports to invoke ORS 646.730 and ORS 646.775 as the statutory bases for the State's claims. Defendant denies that the cited statutes provide a basis for any of the relief sought in the Complaint, and denies that the facts alleged in the Complaint satisfy the elements of a claim under either statute. To the extent Paragraph 2 characterizes or paraphrases the substance of those statutes, Defendant states that the statutes speak for themselves and denies any characterization inconsistent with the plain text thereof.

3. Paragraph 3. Defendant admits that Halcyon Semiconductor AG ("Halcyon AG"), acting through its wholly owned United States subsidiary Halcyon Semiconductor Americas Inc., acquired one hundred percent (100%) of the outstanding shares of Meridian Photonics Inc. ("Meridian") for a purchase price of Two Billion One Hundred Fifty Million Dollars ($2,150,000,000.00) in an all-cash transaction. Defendant further admits that the acquisition closed on January 31, 2023. Defendant denies the allegation that the acquisition violates Oregon antitrust law, substantially lessens competition in any properly defined relevant market, or otherwise causes any of the harms alleged in the Complaint.

4. Paragraph 4. Defendant denies the allegation that the combination of Halcyon and Meridian would substantially lessen competition in the market for "co-packaged optics transceiver modules for data-center applications," or in any other market. Defendant specifically denies that the Attorney General's proposed relevant product market — defined as "co-packaged optics transceiver modules for data-center applications" — is properly defined under applicable antitrust principles. As set forth more fully in Defendant's response to Paragraphs 31 through 40 below, the proper relevant product market is substantially broader than the market alleged in the Complaint and includes, among other things, pluggable optical transceivers, discrete silicon photonics components, and other optical interconnect solutions used in data-center and telecommunications applications.

5. Paragraph 5. Defendant admits that Meridian Photonics Inc. is a Delaware corporation with its headquarters located at 1820 NW Everett Street, Suite 400, Portland, Oregon 97209. Defendant further admits that Meridian designs and manufactures silicon photonics transceivers and co-packaged optics ("CPO") modules. Defendant denies the Complaint's characterization that the acquisition eliminates Meridian as an "independent, disruptive innovator." To the contrary, the acquisition preserves and enhances Meridian's innovative capabilities by combining them with Halcyon's substantial analog and mixed-signal semiconductor expertise, research and development infrastructure, and global manufacturing scale.

6. Paragraph 6. Defendant denies the Attorney General's allegation that, following the acquisition, the combined Halcyon/Meridian entity would hold approximately fifty-eight percent (58%) of United States CPO transceiver sales by revenue, to the extent that such calculation is based on the Attorney General's improperly narrow proposed relevant product market. Defendant states that the relevant market is substantially broader than alleged in the Complaint, and that market-share figures calculated on the basis of the Attorney General's unduly narrow market definition do not accurately reflect competitive conditions in the actual relevant market. Even within the narrowly defined segment identified by the Attorney General, Defendant denies that the combined share figures establish any anticompetitive effect as a matter of law or fact.

7. Paragraph 7. Defendant denies the allegation that Halcyon's vertically integrated position would enable it to degrade interoperability between Meridian CPO modules and competitors' switch application-specific integrated circuits ("ASICs"), or that Halcyon intends to or would engage in any conduct to raise rivals' costs. Defendant states that Halcyon is firmly committed to maintaining interoperability and adherence to open industry standards, including the Optical Internetworking Forum ("OIF") 400ZR and OIF 800ZR specifications. Halcyon's business strategy depends upon broad compatibility and interoperability with a wide range of customer systems and third-party components.

8. Paragraph 8. Defendant denies that divestiture, injunctive relief, civil penalties, or any other form of relief sought in the Complaint is warranted, appropriate, or supported by the facts or the law.

B. Response to Allegations Regarding the Parties (Complaint ¶¶ 9–18)

9. Paragraph 9. Defendant admits that the Plaintiff is the State of Oregon, acting through Attorney General Diane Calloway and the Antitrust Division of the Oregon Department of Justice, which is led by Senior Assistant Attorney General Marcus Trujillo.

10. Paragraph 10. Defendant admits that Halcyon Semiconductor Americas Inc. is a corporation organized under the laws of the State of Delaware and is a wholly owned subsidiary of Halcyon Semiconductor AG, a German Aktiengesellschaft publicly traded on the Frankfurt Stock Exchange under the ticker symbol FSE: HLC, and headquartered at Ludwigstraße 27, 80539 Munich, Bavaria, Germany.

11. Paragraph 11. Defendant admits that Dr. Tobias Wendt serves as Chief Executive Officer of Halcyon Semiconductor AG and that Katrin Schreiber serves as General Counsel of Halcyon Semiconductor AG. Defendant further admits that Priya Nagarajan serves as U.S. Deputy General Counsel of Halcyon Semiconductor Americas Inc.

12. Paragraph 12. Defendant admits that Halcyon Semiconductor AG reported consolidated annual revenue of approximately Nine Billion Three Hundred Million Euros (€9,300,000,000) for fiscal year 2022 and employs approximately 28,500 people worldwide.

13. Paragraph 13. Defendant admits that Halcyon designs and manufactures analog and mixed-signal semiconductors, power management integrated circuits, and — following the completion of the Meridian acquisition — silicon photonics components for high-speed optical interconnects. To the extent Paragraph 13 contains characterizations beyond the foregoing, Defendant denies such characterizations.

14. Paragraph 14. Defendant admits that Meridian Photonics Inc. is a corporation organized under the laws of the State of Delaware, with its headquarters in Portland, Oregon. Defendant further admits that Meridian was founded by Dr. Samuel Ashford, who served as its Chief Executive Officer, and that Linnea Johansson served as Meridian's Chief Financial Officer.

15. Paragraph 15. Defendant admits that Meridian reported fiscal year 2022 revenue of approximately Three Hundred Eighty-Five Million Dollars ($385,000,000) and employed approximately 1,200 persons at the time of the acquisition's closing.

16. Paragraph 16. Defendant admits that Meridian holds forty-seven (47) United States patents related to co-packaged optics technology.

17. Paragraph 17. Defendant admits that, following completion of the acquisition, Meridian Photonics Inc. operates as a wholly owned subsidiary of Halcyon Semiconductor Americas Inc.

18. Paragraph 18. Defendant lacks sufficient knowledge or information to form a belief as to the truth of the Attorney General's characterization of Cascadia Cloud Services Inc. (with data-center operations in Prineville and The Dalles, Oregon) and Northstar Digital Infrastructure LLC (with data-center operations in Hillsboro, Oregon) as "key Oregon data-center customers," and therefore neither admits nor denies such characterization. Defendant admits, upon information and belief, that Cascadia Cloud Services Inc. spent approximately Sixty-Two Million Dollars ($62,000,000) and Northstar Digital Infrastructure LLC spent approximately Twenty-Eight Million Dollars ($28,000,000) on Meridian CPO modules in fiscal year 2022. Defendant denies any characterization or allegation that these customers have been or will be harmed by the acquisition.

C. Response to Allegations Regarding Jurisdiction and Venue (Complaint ¶¶ 19–22)

19. Paragraph 19. Defendant admits that the Circuit Court of the State of Oregon for the County of Multnomah is a court of general jurisdiction under the Oregon Constitution and Oregon statutes. Defendant reserves all objections regarding subject matter jurisdiction over the specific claims asserted in the Complaint, including without limitation any objections arising from federal preemption.

20. Paragraph 20. Defendant admits that venue is proper in Multnomah County, Oregon, for purposes of this action.

21. Paragraph 21. Defendant admits that the Attorney General purports to bring this action under ORS 646.730 and ORS 646.775. Defendant denies that the Attorney General has stated a cognizable claim under those statutes, or that the facts alleged in the Complaint satisfy the statutory elements necessary to establish liability or entitlement to relief.

22. Paragraph 22. Defendant admits that Halcyon Semiconductor Americas Inc. does business in the State of Oregon through the operations of its subsidiary, Meridian Photonics Inc., which maintains its headquarters and certain of its operations in Portland, Oregon. To the extent Paragraph 22 contains additional allegations or characterizations, Defendant denies such allegations.

D. Response to Allegations Regarding the Transaction (Complaint ¶¶ 23–30)

23. Paragraph 23. Defendant admits that on September 8, 2022, Halcyon Semiconductor AG, acting through Halcyon Semiconductor Americas Inc., entered into an Agreement and Plan of Merger with Meridian Photonics Inc. pursuant to which Halcyon agreed to acquire one hundred percent (100%) of the outstanding shares of Meridian.

24. Paragraph 24. Defendant admits that the aggregate purchase price for the acquisition was Two Billion One Hundred Fifty Million Dollars ($2,150,000,000.00), payable in all cash.

25. Paragraph 25. Defendant admits that the acquisition was funded by a Two Billion Two Hundred Million Dollar ($2,200,000,000.00) senior secured term loan facility, with Vereinigte Kreditbank AG serving as administrative agent, and Nordmark Capital Group and Pacific Rim Commercial Bank participating as syndicate lenders. Defendant further admits that Two Billion One Hundred Fifty Million Dollars ($2,150,000,000.00) was drawn at closing from the term loan facility, with Halcyon contributing an additional Fifty Million Dollars ($50,000,000.00) from cash on hand.

26. Paragraph 26. Defendant admits that Callister Blackwood & Co. served as financial advisor to Halcyon in connection with the acquisition.

27. Paragraph 27. Defendant admits that a pre-merger notification filing was made pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), 15 U.S.C. § 18a, on October 3, 2022 (HSR File No. 20221003-1847). Defendant further admits that the Federal Trade Commission and the United States Department of Justice granted early termination of the statutory waiting period on November 14, 2022, without issuing a request for additional information (commonly known as a "second request"). The early termination of the HSR waiting period reflects the federal enforcement agencies' determination, following their review, not to challenge the transaction.

28. Paragraph 28. Defendant admits that no state-level antitrust pre-notification filing was required by applicable law in connection with the acquisition, and that no such filing was made.

29. Paragraph 29. Defendant admits that the acquisition closed on January 31, 2023.

30. Paragraph 30. Defendant admits that on April 10, 2023, the Oregon Attorney General issued a Civil Investigative Demand ("CID") to Halcyon Semiconductor Americas Inc. Defendant denies that any findings or materials obtained through the CID support the Attorney General's claims or otherwise provide a factual basis for the relief sought in the Complaint.

E. Response to Allegations Regarding the Relevant Product Market (Complaint ¶¶ 31–40)

31. Paragraph 31. Defendant denies the allegation that the relevant product market is limited to "co-packaged optics transceiver modules for data-center applications." Defendant states that the proper relevant product market, as defined under applicable antitrust principles including the hypothetical monopolist test set forth in the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, is substantially broader than the market proposed by the Attorney General and includes, at a minimum, pluggable optical transceivers (including QSFP-DD and OSFP form-factor modules), discrete silicon photonics components, and other optical interconnect solutions used in data-center and telecommunications applications.

32. Paragraph 32. Defendant denies that co-packaged optics transceiver modules constitute a distinct product market separate from other optical transceiver technologies. Defendant states that significant demand-side substitutability exists because data-center operators routinely evaluate and deploy both CPO modules and pluggable optical transceivers based on price, performance, power consumption, and deployment flexibility. Defendant further states that significant supply-side substitutability exists because manufacturers of pluggable optical transceivers possess the technical capabilities and manufacturing infrastructure to enter or expand into the CPO segment within a commercially reasonable timeframe and without incurring significant sunk costs.

33. Paragraph 33. Defendant denies the Attorney General's characterization of competitive dynamics in the alleged market as set forth in this paragraph. To the extent Paragraph 33 contains factual assertions regarding the nature or characteristics of CPO technology, Defendant admits that CPO technology is an important and growing segment of the optical interconnect industry, but denies any characterization that suggests the CPO segment is a properly defined relevant antitrust market standing alone.

34. Paragraph 34. Defendant denies the allegations and characterizations set forth in Paragraph 34, including any allegation that competitive dynamics in the alleged CPO market are such that the acquisition would lead to anticompetitive outcomes.

35. Paragraph 35. Defendant admits that the CPO transceiver segment is rapidly growing and that total United States CPO transceiver revenue was approximately Eight Hundred Seventy-Five Million Dollars ($875,000,000) in fiscal year 2022. Defendant states, however, that this segment is part of a broader optical interconnect market that encompasses multiple competing technologies and platforms, and that the rapid growth of the CPO segment reflects expanding total demand rather than displacement of substitutable technologies.

36. Paragraph 36. Defendant denies the Attorney General's market-share calculations to the extent they are based on the improperly narrow market definition proposed in the Complaint. To the extent the Attorney General calculates market shares within the narrowly defined CPO transceiver segment, Defendant admits that Meridian's fiscal year 2022 revenue attributable to CPO transceiver products was approximately Three Hundred Eighty-Five Million Dollars ($385,000,000), and that Halcyon's legacy CPO line revenue was approximately One Hundred Twenty-Two Million Five Hundred Thousand Dollars ($122,500,000).

37. Paragraph 37. Defendant denies the allegations in Paragraph 37 to the extent they rest upon the Attorney General's narrow market definition. Defendant further denies that raw market-share figures, standing alone, establish anticompetitive effects as a matter of law or economic analysis.

38. Paragraph 38. Defendant denies the allegations in Paragraph 38, including any allegation that a combined market share in the Attorney General's proposed relevant product market creates a presumption of anticompetitive effects that cannot be rebutted.

39. Paragraph 39. Defendant admits that Luminos Systems Corp., headquartered in Austin, Texas, is a competitor in the CPO transceiver segment and holds an estimated twenty-two percent (22%) share of United States CPO transceiver sales as calculated under the Attorney General's proposed market definition. Defendant further admits that Crestwave Optical Technologies Ltd., headquartered in Shenzhen, China, holds approximately eleven percent (11%) of United States CPO transceiver sales, and that other and fringe competitors collectively hold approximately nine percent (9%). Defendant denies, however, that these shares demonstrate a concentrated market devoid of meaningful competition. To the contrary, the presence of well-funded, technologically capable competitors such as Luminos and Crestwave, as well as the prospect of entry and expansion by other optical technology firms, ensures that the post-merger market remains robustly competitive.

40. Paragraph 40. Defendant denies that the Attorney General's Herfindahl-Hirschman Index ("HHI") analysis is dispositive of any issue in this case. Defendant admits that, using the Attorney General's proposed market definition, the pre-merger HHI was approximately 2,818, the post-merger HHI is approximately 4,050, and the resulting change in HHI (delta) is approximately 1,232. Defendant states, however, that HHI is only one analytical tool among many and is not dispositive in assessing competitive effects, particularly in a rapidly growing, innovation-driven technology market where competitive conditions are dynamic, barriers to entry are low, and market shares are subject to rapid and significant change. The Merger Guidelines themselves recognize that HHI thresholds are not bright-line rules and must be evaluated in the context of actual market dynamics.

F. Response to Allegations Regarding the Relevant Geographic Market (Complaint ¶¶ 41–45)

41. Paragraph 41. Defendant denies the allegation that the relevant geographic market is limited to the United States, or that a particular focus on Oregon is appropriate for purposes of geographic market definition. Defendant states that the market for co-packaged optics transceiver modules is global in scope. CPO modules are designed, manufactured, and sold on a worldwide basis, and customers — including data-center operators in Oregon and throughout the United States — routinely source CPO components from suppliers located in the United States, Europe, and Asia.

42. Paragraph 42. Defendant denies that the Attorney General's emphasis on Oregon-based customers, including Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC, defines or supports a cognizable geographic submarket limited to Oregon or any sub-national region. These customers operate sophisticated, multi-facility data-center networks and procure CPO modules through national and international procurement processes that are not constrained by state or regional geographic boundaries.

43. Paragraph 43. Defendant denies the remaining allegations in Paragraph 43 for the same reasons set forth in response to Paragraphs 41 and 42.

44. Paragraph 44. Defendant states that CPO transceiver modules are sold globally, that customers routinely source from international suppliers including Crestwave Optical Technologies Ltd. in Shenzhen, China, and that transportation costs for CPO modules are negligible relative to product value, which further supports the conclusion that the relevant geographic market is global rather than national or sub-national.

45. Paragraph 45. Defendant denies the remaining allegations in Paragraph 45. To the extent Paragraph 45 contains factual assertions not specifically addressed above, Defendant lacks sufficient information to admit or deny such assertions and therefore denies them.

G. Response to Allegations Regarding Anticompetitive Effects (Complaint ¶¶ 46–60)

46. Paragraph 46. Defendant denies the allegation that the acquisition substantially lessens competition in any relevant market, whether defined as proposed by the Attorney General or otherwise.

47. Paragraph 47. Defendant denies the allegation that the acquisition eliminates Meridian as an independent, disruptive innovator. Defendant states that Meridian's innovative capabilities — including its portfolio of forty-seven (47) CPO-related patents and its team of experienced engineers and scientists — are enhanced, not diminished, by integration with Halcyon's analog and mixed-signal semiconductor expertise, its advanced fabrication capabilities, and its substantial research and development resources. The acquisition enables Meridian to accelerate its product roadmap and bring next-generation CPO solutions to market more quickly and at greater scale than it could have achieved as an independent company.

48. Paragraph 48. Defendant denies the Attorney General's vertical foreclosure theory. Defendant denies that it intends to or would degrade interoperability between Meridian CPO modules and third-party switch ASICs manufactured by other semiconductor companies. Halcyon's business interests are best served by ensuring that Meridian's CPO modules are compatible with the widest possible range of switch platforms.

49. Paragraph 49. Defendant denies the allegations in Paragraph 49. Defendant states that it is committed to compliance with OIF 400ZR and OIF 800ZR industry standards, which are the prevailing open standards for coherent optical interconnects in data-center environments. Halcyon has publicly committed to continued participation in the Optical Internetworking Forum and other standards-setting bodies, and to maintaining full interoperability with third-party components.

50. Paragraph 50. Defendant denies the remaining allegations in Paragraph 50.

51. Paragraph 51. Defendant denies that the acquisition raises rivals' costs or creates barriers to entry in any relevant market. The CPO transceiver segment is characterized by low barriers to entry relative to the scale of the opportunity, and multiple firms possess the technical capabilities and financial resources to enter or expand in this space.

52. Paragraph 52. Defendant denies the allegations in Paragraph 52. Defendant states that multiple competitors, including Luminos Systems Corp. and Crestwave Optical Technologies Ltd., maintain robust research and development programs, are actively expanding their CPO manufacturing capacity, and are well-positioned to compete vigorously for customers in the CPO segment. Luminos, in particular, has announced capital expenditures exceeding $200 million for CPO facility expansion in 2023 and 2024.

53. Paragraph 53. Defendant denies the allegations in Paragraph 53 and incorporates its responses to Paragraphs 51 and 52 by reference.

54. Paragraph 54. Defendant denies the Attorney General's allegations regarding harm to Oregon data-center customers. Defendant states that the acquisition enables Halcyon to deliver lower-cost, higher-performance CPO modules to all customers, including Oregon-based data-center operators such as Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC, by combining Meridian's silicon photonics design expertise with Halcyon's semiconductor manufacturing capabilities and supply chain efficiencies.

55. Paragraph 55. Defendant denies the allegations in Paragraph 55 and states that Oregon data-center customers have multiple alternative sources for CPO modules and are not dependent solely upon Meridian for their optical interconnect requirements.

56. Paragraph 56. Defendant denies the allegations in Paragraph 56 and incorporates its responses to Paragraphs 54 and 55 by reference.

57. Paragraph 57. Defendant denies all remaining allegations of anticompetitive effects set forth in Paragraph 57.

58. Paragraph 58. Defendant denies the allegations in Paragraph 58.

59. Paragraph 59. Defendant denies the allegations in Paragraph 59.

60. Paragraph 60. Defendant denies the allegations in Paragraph 60. Defendant states that the acquisition generates significant procompetitive efficiencies, including but not limited to: (a) vertical integration synergies resulting from the combination of Halcyon's analog and mixed-signal semiconductor design and manufacturing capabilities with Meridian's silicon photonics platform; (b) cost savings arising from shared manufacturing, procurement, and supply-chain infrastructure; (c) accelerated innovation through the combination of complementary intellectual property portfolios and engineering teams; and (d) expanded output and improved product offerings for customers across all segments.

H. Response to Allegations Regarding Relief Sought (Complaint ¶¶ 61–65)

61. Paragraph 61. Defendant denies that the State of Oregon is entitled to injunctive relief, divestiture, or any other equitable remedy in connection with the acquisition. The acquisition was lawfully consummated following federal HSR Act review and early termination, and the Attorney General has not demonstrated any cognizable basis for post-closing relief.

62. Paragraph 62. Defendant denies the allegations in Paragraph 62 and reiterates that no form of equitable relief is warranted.

63. Paragraph 63. Defendant denies the allegations in Paragraph 63.

64. Paragraph 64. Defendant denies that the State of Oregon is entitled to civil penalties under ORS 646.775 or any other provision of Oregon law. The acquisition does not violate ORS 646.730, and no basis exists for the imposition of penalties.

65. Paragraph 65. Defendant denies that the State of Oregon is entitled to an award of attorneys' fees, costs, or any other form of relief. Defendant further denies that the Attorney General is entitled to any relief whatsoever in this action.

II. GENERAL DENIAL

Defendant denies each and every allegation in the Complaint that is not expressly admitted in the foregoing responses. Without limiting the generality of the foregoing, Defendant specifically denies that the acquisition of Meridian Photonics Inc. violates ORS 646.730, ORS 646.775, or any other provision of Oregon law. Defendant further denies that the Plaintiff, the State of Oregon, is entitled to any of the relief sought in the Complaint, whether injunctive, equitable, monetary, or otherwise.

III. AFFIRMATIVE DEFENSES

Without assuming any burden of proof that would otherwise rest upon the Plaintiff, and without waiving any objections, defenses, or arguments otherwise available, Defendant asserts the following affirmative defenses:

First Affirmative Defense: Federal Preemption (HSR Act)

The Attorney General's claims are preempted by federal law. The acquisition at issue was subject to the pre-merger notification and review requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a (the "HSR Act"). The parties to the transaction filed the required notification with the Federal Trade Commission ("FTC") and the Antitrust Division of the United States Department of Justice ("DOJ") on October 3, 2022 (HSR File No. 20221003-1847). Following their review of the filing and the competitive implications of the proposed transaction, the FTC and DOJ granted early termination of the statutory waiting period on November 14, 2022, without issuing a request for additional information or documentary material (a "second request"). The federal agencies' decision to grant early termination reflects an affirmative determination, based on the information available to them, that the transaction did not warrant further investigation or challenge under federal antitrust law.

The federal government's clearance of the transaction under the HSR Act, and the comprehensive federal framework for pre-merger review established by the HSR Act and the Clayton Act, 15 U.S.C. § 18, preempts a post-closing state antitrust challenge to the same transaction, particularly where — as here — the federal enforcement agencies had a full opportunity to investigate and affirmatively chose not to challenge the merger. A state enforcement action that seeks to unwind or impose remedies on a transaction that the federal government has cleared under its exclusive pre-merger review framework is in conflict with, and stands as an obstacle to the accomplishment and execution of the full purposes and objectives of, the federal antitrust regulatory scheme. The Supremacy Clause of the United States Constitution, Article VI, Clause 2, bars such state enforcement actions.

Second Affirmative Defense: Failure to State a Claim

The Complaint fails to state facts sufficient to constitute a claim upon which relief may be granted under ORS 646.730, ORS 646.775, or any other provision of Oregon law. The Attorney General has not plausibly alleged a relevant product market, a relevant geographic market, or facts demonstrating that the acquisition may substantially lessen competition or tend to create a monopoly in any properly defined relevant market.

Specifically, the alleged product market of "co-packaged optics transceiver modules for data-center applications" is improperly narrow and fails to account for well-established demand-side and supply-side substitutability between CPO modules and other optical transceiver technologies, including pluggable optical transceivers in QSFP-DD and OSFP form factors, discrete silicon photonics components, and other optical interconnect solutions. The Attorney General's proposed market definition does not satisfy the hypothetical monopolist test and would not withstand scrutiny under applicable economic principles and legal precedent.

Similarly, the alleged geographic limitation to the United States, with particular emphasis on Oregon, is artificial and unsupported by the evidence. The CPO transceiver market is global in scope, with customers — including the Oregon-based customers identified in the Complaint — routinely sourcing from international suppliers. Transportation costs are negligible relative to product value, and no trade barriers exist that would constrain customers to domestic suppliers.

Third Affirmative Defense: Procompetitive Efficiencies

Even assuming, arguendo, that the Attorney General has properly defined the relevant market and has demonstrated a prima facie case of anticompetitive effects, the acquisition generates substantial procompetitive efficiencies that outweigh any alleged anticompetitive effects and that could not be achieved through means less restrictive than the merger. Specifically:

(a) The combination of Halcyon's analog and mixed-signal semiconductor expertise, power management integrated circuit capabilities, and advanced semiconductor manufacturing infrastructure with Meridian's portfolio of forty-seven (47) CPO-related United States patents and world-class silicon photonics design capabilities creates a vertically integrated platform uniquely positioned to deliver lower-cost, higher-performance CPO modules to customers;

(b) The acquisition enables accelerated innovation in CPO technology by combining complementary intellectual property portfolios, engineering teams, and research and development programs, thereby reducing time-to-market for next-generation products;

(c) The acquisition expands total output by enabling Halcyon to invest in and scale Meridian's manufacturing operations, including its Portland, Oregon facility, at a rate that Meridian could not have achieved independently; and

(d) These efficiencies are merger-specific, verifiable, and benefit consumers, including Oregon data-center operators such as Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC.

Fourth Affirmative Defense: Failing-Firm / Weakened-Competitor Doctrine

Meridian's standalone CPO business was not sustainable as an independent enterprise over the long term. Absent the acquisition by Halcyon, Meridian faced significant capital constraints, intensifying competitive pressures from larger, better-capitalized rivals, and a need for substantial additional investment in manufacturing capacity and next-generation product development that exceeded its independent financial resources. These factors would have diminished Meridian's ability to compete independently and effectively in the CPO transceiver segment over time. The acquisition by Halcyon preserved Meridian's competitive assets — including its intellectual property, customer relationships, and experienced workforce — and preserved approximately 1,200 jobs, including those at Meridian's Portland, Oregon headquarters and operations.

Fifth Affirmative Defense: No Substantial Lessening of Competition

The Attorney General has failed to demonstrate that the acquisition may substantially lessen competition in any properly defined relevant market. The United States CPO transceiver market, which generated approximately Eight Hundred Seventy-Five Million Dollars ($875,000,000) in fiscal year 2022 revenue, is dynamic, rapidly growing, and characterized by significant ongoing innovation and relatively low barriers to entry and expansion. The market is populated by credible, well-funded competitors, including:

• Luminos Systems Corp. (Austin, Texas), with an estimated twenty-two percent (22%) share of United States CPO transceiver sales and a publicly announced multi-hundred-million-dollar capital expansion program;

• Crestwave Optical Technologies Ltd. (Shenzhen, China), with an estimated eleven percent (11%) share and growing international presence; and

• Other and fringe competitors, collectively holding approximately nine percent (9%) of United States CPO transceiver sales, including firms actively investing in CPO research and development.

The post-merger market remains competitive and contestable. While Defendant acknowledges that the post-merger HHI, as calculated under the Attorney General's proposed market definition, is approximately 4,050 (with a delta of approximately 1,232), HHI figures are not dispositive of competitive effects in any market, and are particularly unreliable as indicators of competitive harm in a high-growth, innovation-driven technology market where market shares are volatile, where new entry and expansion are ongoing, and where competitive conditions are driven primarily by innovation and product performance rather than by static market positions.

Sixth Affirmative Defense: Absence of Harm to Oregon Consumers

The Attorney General has not demonstrated any actual or threatened harm to Oregon consumers, businesses, or the public interest as a result of the acquisition. To the contrary, the acquisition benefits Oregon-based customers and the State of Oregon more broadly by ensuring a continued and enhanced supply of advanced CPO modules, by enabling Halcyon to invest further in Meridian's Portland operations and workforce, and by accelerating the development of next-generation optical interconnect technologies that will benefit Oregon's data-center industry and technology sector.

Seventh Affirmative Defense: Reservation of Additional Defenses

Defendant has not yet had the benefit of discovery in this action and has not had a full opportunity to investigate all facts relevant to this matter. Defendant therefore expressly reserves the right to assert additional affirmative defenses, and to amend or supplement the affirmative defenses set forth herein, as may become apparent through the course of discovery and further investigation of the facts and applicable law. Nothing in this Answer shall be construed as a waiver of any defense or argument available to Defendant.

IV. PRAYER FOR RELIEF

WHEREFORE, Defendant Halcyon Semiconductor Americas Inc. respectfully requests that this Court enter judgment in its favor and against the Plaintiff, and specifically requests the following relief:

1. That the Complaint be dismissed in its entirety, with prejudice, and that no further proceedings be had thereon;

2. That all relief sought by the State of Oregon be denied, including but not limited to injunctive relief, divestiture, civil penalties under ORS 646.775, and attorneys' fees and costs;

3. That Defendant be awarded its costs and disbursements incurred in connection with this action, to the fullest extent permitted by law; and

4. That this Court grant such other and further relief as it deems just, equitable, and proper.

V. DEMAND FOR JURY TRIAL

Defendant Halcyon Semiconductor Americas Inc. hereby demands a trial by jury on all issues so triable in this action, to the fullest extent permitted by the Oregon Constitution, the Oregon Rules of Civil Procedure, and applicable law. To the extent that any claims asserted in the Complaint are equitable in nature and not subject to trial by jury, Defendant reserves all rights with respect to such claims and acknowledges the equitable nature of the Attorney General's requests for injunctive and other equitable relief.

DATED: May 5, 2023

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Elaine Forsythe (admitted pro hac vice, application pending) Responsible Partner, Antitrust & Competition Practice Group 1301 Avenue of the Americas, 35th Floor New York, NY 10019 Telephone: (212) 558-4000 Facsimile: (212) 558-3588

Email: eforsythe@calderwoodharkness.com

Also: 555 California Street, Suite 2800 San Francisco, CA 94104 Telephone: (415) 772-1200

Aaron Liu (admitted pro hac vice, application pending) Lead Associate, Antitrust & Competition Practice Group 1301 Avenue of the Americas, 35th Floor New York, NY 10019 Telephone: (212) 558-4000

Email: aliu@calderwoodharkness.com

GRANTHAM DAVIS & KOWALSKI LLP

By: ________

Thomas Kowalski, OSB No. 041876 Partner, Local Counsel for Defendant 900 SW Fifth Avenue, Suite 2600 Portland, OR 97204 Telephone: (503) 224-3500 Facsimile: (503) 224-3501

Email: tkowalski@gdklaw.com

Attorneys for Defendant Halcyon Semiconductor Americas Inc.

CERTIFICATE OF SERVICE

I hereby certify that on May 5, 2023, I caused a true and correct copy of the foregoing ANSWER OF DEFENDANT HALCYON SEMICONDUCTOR AMERICAS INC. TO COMPLAINT to be served upon the following counsel of record by electronic filing through the Oregon Judicial Department's Odyssey File & Serve system and by electronic mail, in accordance with the Oregon Rules of Civil Procedure and the Multnomah County Supplementary Local Rules:

Counsel for Plaintiff:

Marcus Trujillo Senior Assistant Attorney General Antitrust Division Oregon Department of Justice 1162 Court Street NE Salem, OR 97301

Email: marcus.trujillo@doj.state.or.us

Constance Yee Derek Holmgren Ashworth & Pendleton LLP 1120 SW Third Avenue, Suite 1500 Portland, OR 97204

Email: cyee@ashworthpendleton.com

Email: dholmgren@ashworthpendleton.com

Outside Counsel for Plaintiff

By: ________

Thomas Kowalski, OSB No. 041876 GRANTHAM DAVIS & KOWALSKI LLP 900 SW Fifth Avenue, Suite 2600 Portland, OR 97204 Telephone: (503) 224-3500

Email: tkowalski@gdklaw.com

Dated: May 5, 2023

STATE OF OREGON, by and through

Attorney General Diane Calloway,

Hon. Robert Castañeda

Plaintiff,

ANSWER OF DEFENDANT

AMERICAS INC. TO COMPLAINT

HALCYON SEMICONDUCTOR AMERICAS INC.,

a Delaware corporation,

Defendant.

IN THE CIRCUIT COURT OF THE STATE OF OREGON FOR THE COUNTY OF MULTNOMAH
ANSWER OF DEFENDANT HALCYON SEMICONDUCTOR AMERICAS INC. TO COMPLAINT
Defendant Halcyon Semiconductor Americas Inc. ("Halcyon Americas" or "Defendant"), a Delaware corporation with its principal place of business at 4500 Great America Parkway, Suite 300, Santa Clara, California 95054, Employer Identification Number 84-3921057, by and through its undersigned counsel, Calderwood & Harkness LLP and Grantham Davis & Kowalski LLP, hereby answers the Complaint filed by the State of Oregon, by and through Attorney General Diane Calloway (the "Complaint"), on April 17, 2023, and states as follows. Except as expressly admitted herein, Defendant denies each and every allegation contained in the Complaint, including all introductory paragraphs, headings, characterizations, conclusions of law, and requests for relief. Defendant further reserves the right to amend this Answer and to assert additional affirmative or other defenses as may become apparent through discovery or further investigation of the facts and applicable law.
I. RESPONSES TO ALLEGATIONS IN THE COMPLAINT
A. Response to Introduction and Summary of Action (Complaint ¶¶ 1–8)
1. Paragraph 1. Defendant admits that this action was brought by the State of Oregon, by and through Attorney General Diane Calloway, and that the Complaint purports to challenge the acquisition of Meridian Photonics Inc. by Halcyon Semiconductor Americas Inc. Defendant denies the Complaint's characterization that the transaction at issue is unlawful, anticompetitive, or in violation of Oregon law. To the extent the remaining allegations in Paragraph 1 constitute legal conclusions, no response is required; to the extent a response is deemed required, Defendant denies such allegations.
2. Paragraph 2. Defendant admits that the Complaint purports to invoke ORS 646.730 and ORS 646.775 as the statutory bases for the State's claims. Defendant denies that the cited statutes provide a basis for any of the relief sought in the Complaint, and denies that the facts alleged in the Complaint satisfy the elements of a claim under either statute. To the extent Paragraph 2 characterizes or paraphrases the substance of those statutes, Defendant states that the statutes speak for themselves and denies any characterization inconsistent with the plain text thereof.
3. Paragraph 3. Defendant admits that Halcyon Semiconductor AG ("Halcyon AG"), acting through its wholly owned United States subsidiary Halcyon Semiconductor Americas Inc., acquired one hundred percent (100%) of the outstanding shares of Meridian Photonics Inc. ("Meridian") for a purchase price of Two Billion One Hundred Fifty Million Dollars ($2,150,000,000.00) in an all-cash transaction. Defendant further admits that the acquisition closed on January 31, 2023. Defendant denies the allegation that the acquisition violates Oregon antitrust law, substantially lessens competition in any properly defined relevant market, or otherwise causes any of the harms alleged in the Complaint.
4. Paragraph 4. Defendant denies the allegation that the combination of Halcyon and Meridian would substantially lessen competition in the market for "co-packaged optics transceiver modules for data-center applications," or in any other market. Defendant specifically denies that the Attorney General's proposed relevant product market — defined as "co-packaged optics transceiver modules for data-center applications" — is properly defined under applicable antitrust principles. As set forth more fully in Defendant's response to Paragraphs 31 through 40 below, the proper relevant product market is substantially broader than the market alleged in the Complaint and includes, among other things, pluggable optical transceivers, discrete silicon photonics components, and other optical interconnect solutions used in data-center and telecommunications applications.
5. Paragraph 5. Defendant admits that Meridian Photonics Inc. is a Delaware corporation with its headquarters located at 1820 NW Everett Street, Suite 400, Portland, Oregon 97209. Defendant further admits that Meridian designs and manufactures silicon photonics transceivers and co-packaged optics ("CPO") modules. Defendant denies the Complaint's characterization that the acquisition eliminates Meridian as an "independent, disruptive innovator." To the contrary, the acquisition preserves and enhances Meridian's innovative capabilities by combining them with Halcyon's substantial analog and mixed-signal semiconductor expertise, research and development infrastructure, and global manufacturing scale.
6. Paragraph 6. Defendant denies the Attorney General's allegation that, following the acquisition, the combined Halcyon/Meridian entity would hold approximately fifty-eight percent (58%) of United States CPO transceiver sales by revenue, to the extent that such calculation is based on the Attorney General's improperly narrow proposed relevant product market. Defendant states that the relevant market is substantially broader than alleged in the Complaint, and that market-share figures calculated on the basis of the Attorney General's unduly narrow market definition do not accurately reflect competitive conditions in the actual relevant market. Even within the narrowly defined segment identified by the Attorney General, Defendant denies that the combined share figures establish any anticompetitive effect as a matter of law or fact.
7. Paragraph 7. Defendant denies the allegation that Halcyon's vertically integrated position would enable it to degrade interoperability between Meridian CPO modules and competitors' switch application-specific integrated circuits ("ASICs"), or that Halcyon intends to or would engage in any conduct to raise rivals' costs. Defendant states that Halcyon is firmly committed to maintaining interoperability and adherence to open industry standards, including the Optical Internetworking Forum ("OIF") 400ZR and OIF 800ZR specifications. Halcyon's business strategy depends upon broad compatibility and interoperability with a wide range of customer systems and third-party components.
8. Paragraph 8. Defendant denies that divestiture, injunctive relief, civil penalties, or any other form of relief sought in the Complaint is warranted, appropriate, or supported by the facts or the law.
B. Response to Allegations Regarding the Parties (Complaint ¶¶ 9–18)
9. Paragraph 9. Defendant admits that the Plaintiff is the State of Oregon, acting through Attorney General Diane Calloway and the Antitrust Division of the Oregon Department of Justice, which is led by Senior Assistant Attorney General Marcus Trujillo.
10. Paragraph 10. Defendant admits that Halcyon Semiconductor Americas Inc. is a corporation organized under the laws of the State of Delaware and is a wholly owned subsidiary of Halcyon Semiconductor AG, a German Aktiengesellschaft publicly traded on the Frankfurt Stock Exchange under the ticker symbol FSE: HLC, and headquartered at Ludwigstraße 27, 80539 Munich, Bavaria, Germany.
11. Paragraph 11. Defendant admits that Dr. Tobias Wendt serves as Chief Executive Officer of Halcyon Semiconductor AG and that Katrin Schreiber serves as General Counsel of Halcyon Semiconductor AG. Defendant further admits that Priya Nagarajan serves as U.S. Deputy General Counsel of Halcyon Semiconductor Americas Inc.
12. Paragraph 12. Defendant admits that Halcyon Semiconductor AG reported consolidated annual revenue of approximately Nine Billion Three Hundred Million Euros (€9,300,000,000) for fiscal year 2022 and employs approximately 28,500 people worldwide.
13. Paragraph 13. Defendant admits that Halcyon designs and manufactures analog and mixed-signal semiconductors, power management integrated circuits, and — following the completion of the Meridian acquisition — silicon photonics components for high-speed optical interconnects. To the extent Paragraph 13 contains characterizations beyond the foregoing, Defendant denies such characterizations.
14. Paragraph 14. Defendant admits that Meridian Photonics Inc. is a corporation organized under the laws of the State of Delaware, with its headquarters in Portland, Oregon. Defendant further admits that Meridian was founded by Dr. Samuel Ashford, who served as its Chief Executive Officer, and that Linnea Johansson served as Meridian's Chief Financial Officer.
15. Paragraph 15. Defendant admits that Meridian reported fiscal year 2022 revenue of approximately Three Hundred Eighty-Five Million Dollars ($385,000,000) and employed approximately 1,200 persons at the time of the acquisition's closing.
16. Paragraph 16. Defendant admits that Meridian holds forty-seven (47) United States patents related to co-packaged optics technology.
17. Paragraph 17. Defendant admits that, following completion of the acquisition, Meridian Photonics Inc. operates as a wholly owned subsidiary of Halcyon Semiconductor Americas Inc.
18. Paragraph 18. Defendant lacks sufficient knowledge or information to form a belief as to the truth of the Attorney General's characterization of Cascadia Cloud Services Inc. (with data-center operations in Prineville and The Dalles, Oregon) and Northstar Digital Infrastructure LLC (with data-center operations in Hillsboro, Oregon) as "key Oregon data-center customers," and therefore neither admits nor denies such characterization. Defendant admits, upon information and belief, that Cascadia Cloud Services Inc. spent approximately Sixty-Two Million Dollars ($62,000,000) and Northstar Digital Infrastructure LLC spent approximately Twenty-Eight Million Dollars ($28,000,000) on Meridian CPO modules in fiscal year 2022. Defendant denies any characterization or allegation that these customers have been or will be harmed by the acquisition.
C. Response to Allegations Regarding Jurisdiction and Venue (Complaint ¶¶ 19–22)
19. Paragraph 19. Defendant admits that the Circuit Court of the State of Oregon for the County of Multnomah is a court of general jurisdiction under the Oregon Constitution and Oregon statutes. Defendant reserves all objections regarding subject matter jurisdiction over the specific claims asserted in the Complaint, including without limitation any objections arising from federal preemption.
20. Paragraph 20. Defendant admits that venue is proper in Multnomah County, Oregon, for purposes of this action.
21. Paragraph 21. Defendant admits that the Attorney General purports to bring this action under ORS 646.730 and ORS 646.775. Defendant denies that the Attorney General has stated a cognizable claim under those statutes, or that the facts alleged in the Complaint satisfy the statutory elements necessary to establish liability or entitlement to relief.
22. Paragraph 22. Defendant admits that Halcyon Semiconductor Americas Inc. does business in the State of Oregon through the operations of its subsidiary, Meridian Photonics Inc., which maintains its headquarters and certain of its operations in Portland, Oregon. To the extent Paragraph 22 contains additional allegations or characterizations, Defendant denies such allegations.
D. Response to Allegations Regarding the Transaction (Complaint ¶¶ 23–30)
23. Paragraph 23. Defendant admits that on September 8, 2022, Halcyon Semiconductor AG, acting through Halcyon Semiconductor Americas Inc., entered into an Agreement and Plan of Merger with Meridian Photonics Inc. pursuant to which Halcyon agreed to acquire one hundred percent (100%) of the outstanding shares of Meridian.
24. Paragraph 24. Defendant admits that the aggregate purchase price for the acquisition was Two Billion One Hundred Fifty Million Dollars ($2,150,000,000.00), payable in all cash.
25. Paragraph 25. Defendant admits that the acquisition was funded by a Two Billion Two Hundred Million Dollar ($2,200,000,000.00) senior secured term loan facility, with Vereinigte Kreditbank AG serving as administrative agent, and Nordmark Capital Group and Pacific Rim Commercial Bank participating as syndicate lenders. Defendant further admits that Two Billion One Hundred Fifty Million Dollars ($2,150,000,000.00) was drawn at closing from the term loan facility, with Halcyon contributing an additional Fifty Million Dollars ($50,000,000.00) from cash on hand.
26. Paragraph 26. Defendant admits that Callister Blackwood & Co. served as financial advisor to Halcyon in connection with the acquisition.
27. Paragraph 27. Defendant admits that a pre-merger notification filing was made pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), 15 U.S.C. § 18a, on October 3, 2022 (HSR File No. 20221003-1847). Defendant further admits that the Federal Trade Commission and the United States Department of Justice granted early termination of the statutory waiting period on November 14, 2022, without issuing a request for additional information (commonly known as a "second request"). The early termination of the HSR waiting period reflects the federal enforcement agencies' determination, following their review, not to challenge the transaction.
28. Paragraph 28. Defendant admits that no state-level antitrust pre-notification filing was required by applicable law in connection with the acquisition, and that no such filing was made.
29. Paragraph 29. Defendant admits that the acquisition closed on January 31, 2023.
30. Paragraph 30. Defendant admits that on April 10, 2023, the Oregon Attorney General issued a Civil Investigative Demand ("CID") to Halcyon Semiconductor Americas Inc. Defendant denies that any findings or materials obtained through the CID support the Attorney General's claims or otherwise provide a factual basis for the relief sought in the Complaint.
E. Response to Allegations Regarding the Relevant Product Market (Complaint ¶¶ 31–40)
31. Paragraph 31. Defendant denies the allegation that the relevant product market is limited to "co-packaged optics transceiver modules for data-center applications." Defendant states that the proper relevant product market, as defined under applicable antitrust principles including the hypothetical monopolist test set forth in the U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, is substantially broader than the market proposed by the Attorney General and includes, at a minimum, pluggable optical transceivers (including QSFP-DD and OSFP form-factor modules), discrete silicon photonics components, and other optical interconnect solutions used in data-center and telecommunications applications.
32. Paragraph 32. Defendant denies that co-packaged optics transceiver modules constitute a distinct product market separate from other optical transceiver technologies. Defendant states that significant demand-side substitutability exists because data-center operators routinely evaluate and deploy both CPO modules and pluggable optical transceivers based on price, performance, power consumption, and deployment flexibility. Defendant further states that significant supply-side substitutability exists because manufacturers of pluggable optical transceivers possess the technical capabilities and manufacturing infrastructure to enter or expand into the CPO segment within a commercially reasonable timeframe and without incurring significant sunk costs.
33. Paragraph 33. Defendant denies the Attorney General's characterization of competitive dynamics in the alleged market as set forth in this paragraph. To the extent Paragraph 33 contains factual assertions regarding the nature or characteristics of CPO technology, Defendant admits that CPO technology is an important and growing segment of the optical interconnect industry, but denies any characterization that suggests the CPO segment is a properly defined relevant antitrust market standing alone.
34. Paragraph 34. Defendant denies the allegations and characterizations set forth in Paragraph 34, including any allegation that competitive dynamics in the alleged CPO market are such that the acquisition would lead to anticompetitive outcomes.
35. Paragraph 35. Defendant admits that the CPO transceiver segment is rapidly growing and that total United States CPO transceiver revenue was approximately Eight Hundred Seventy-Five Million Dollars ($875,000,000) in fiscal year 2022. Defendant states, however, that this segment is part of a broader optical interconnect market that encompasses multiple competing technologies and platforms, and that the rapid growth of the CPO segment reflects expanding total demand rather than displacement of substitutable technologies.
36. Paragraph 36. Defendant denies the Attorney General's market-share calculations to the extent they are based on the improperly narrow market definition proposed in the Complaint. To the extent the Attorney General calculates market shares within the narrowly defined CPO transceiver segment, Defendant admits that Meridian's fiscal year 2022 revenue attributable to CPO transceiver products was approximately Three Hundred Eighty-Five Million Dollars ($385,000,000), and that Halcyon's legacy CPO line revenue was approximately One Hundred Twenty-Two Million Five Hundred Thousand Dollars ($122,500,000).
37. Paragraph 37. Defendant denies the allegations in Paragraph 37 to the extent they rest upon the Attorney General's narrow market definition. Defendant further denies that raw market-share figures, standing alone, establish anticompetitive effects as a matter of law or economic analysis.
38. Paragraph 38. Defendant denies the allegations in Paragraph 38, including any allegation that a combined market share in the Attorney General's proposed relevant product market creates a presumption of anticompetitive effects that cannot be rebutted.
39. Paragraph 39. Defendant admits that Luminos Systems Corp., headquartered in Austin, Texas, is a competitor in the CPO transceiver segment and holds an estimated twenty-two percent (22%) share of United States CPO transceiver sales as calculated under the Attorney General's proposed market definition. Defendant further admits that Crestwave Optical Technologies Ltd., headquartered in Shenzhen, China, holds approximately eleven percent (11%) of United States CPO transceiver sales, and that other and fringe competitors collectively hold approximately nine percent (9%). Defendant denies, however, that these shares demonstrate a concentrated market devoid of meaningful competition. To the contrary, the presence of well-funded, technologically capable competitors such as Luminos and Crestwave, as well as the prospect of entry and expansion by other optical technology firms, ensures that the post-merger market remains robustly competitive.
40. Paragraph 40. Defendant denies that the Attorney General's Herfindahl-Hirschman Index ("HHI") analysis is dispositive of any issue in this case. Defendant admits that, using the Attorney General's proposed market definition, the pre-merger HHI was approximately 2,818, the post-merger HHI is approximately 4,050, and the resulting change in HHI (delta) is approximately 1,232. Defendant states, however, that HHI is only one analytical tool among many and is not dispositive in assessing competitive effects, particularly in a rapidly growing, innovation-driven technology market where competitive conditions are dynamic, barriers to entry are low, and market shares are subject to rapid and significant change. The Merger Guidelines themselves recognize that HHI thresholds are not bright-line rules and must be evaluated in the context of actual market dynamics.
F. Response to Allegations Regarding the Relevant Geographic Market (Complaint ¶¶ 41–45)
41. Paragraph 41. Defendant denies the allegation that the relevant geographic market is limited to the United States, or that a particular focus on Oregon is appropriate for purposes of geographic market definition. Defendant states that the market for co-packaged optics transceiver modules is global in scope. CPO modules are designed, manufactured, and sold on a worldwide basis, and customers — including data-center operators in Oregon and throughout the United States — routinely source CPO components from suppliers located in the United States, Europe, and Asia.
42. Paragraph 42. Defendant denies that the Attorney General's emphasis on Oregon-based customers, including Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC, defines or supports a cognizable geographic submarket limited to Oregon or any sub-national region. These customers operate sophisticated, multi-facility data-center networks and procure CPO modules through national and international procurement processes that are not constrained by state or regional geographic boundaries.
43. Paragraph 43. Defendant denies the remaining allegations in Paragraph 43 for the same reasons set forth in response to Paragraphs 41 and 42.
44. Paragraph 44. Defendant states that CPO transceiver modules are sold globally, that customers routinely source from international suppliers including Crestwave Optical Technologies Ltd. in Shenzhen, China, and that transportation costs for CPO modules are negligible relative to product value, which further supports the conclusion that the relevant geographic market is global rather than national or sub-national.
45. Paragraph 45. Defendant denies the remaining allegations in Paragraph 45. To the extent Paragraph 45 contains factual assertions not specifically addressed above, Defendant lacks sufficient information to admit or deny such assertions and therefore denies them.
G. Response to Allegations Regarding Anticompetitive Effects (Complaint ¶¶ 46–60)
46. Paragraph 46. Defendant denies the allegation that the acquisition substantially lessens competition in any relevant market, whether defined as proposed by the Attorney General or otherwise.
47. Paragraph 47. Defendant denies the allegation that the acquisition eliminates Meridian as an independent, disruptive innovator. Defendant states that Meridian's innovative capabilities — including its portfolio of forty-seven (47) CPO-related patents and its team of experienced engineers and scientists — are enhanced, not diminished, by integration with Halcyon's analog and mixed-signal semiconductor expertise, its advanced fabrication capabilities, and its substantial research and development resources. The acquisition enables Meridian to accelerate its product roadmap and bring next-generation CPO solutions to market more quickly and at greater scale than it could have achieved as an independent company.
48. Paragraph 48. Defendant denies the Attorney General's vertical foreclosure theory. Defendant denies that it intends to or would degrade interoperability between Meridian CPO modules and third-party switch ASICs manufactured by other semiconductor companies. Halcyon's business interests are best served by ensuring that Meridian's CPO modules are compatible with the widest possible range of switch platforms.
49. Paragraph 49. Defendant denies the allegations in Paragraph 49. Defendant states that it is committed to compliance with OIF 400ZR and OIF 800ZR industry standards, which are the prevailing open standards for coherent optical interconnects in data-center environments. Halcyon has publicly committed to continued participation in the Optical Internetworking Forum and other standards-setting bodies, and to maintaining full interoperability with third-party components.
50. Paragraph 50. Defendant denies the remaining allegations in Paragraph 50.
51. Paragraph 51. Defendant denies that the acquisition raises rivals' costs or creates barriers to entry in any relevant market. The CPO transceiver segment is characterized by low barriers to entry relative to the scale of the opportunity, and multiple firms possess the technical capabilities and financial resources to enter or expand in this space.
52. Paragraph 52. Defendant denies the allegations in Paragraph 52. Defendant states that multiple competitors, including Luminos Systems Corp. and Crestwave Optical Technologies Ltd., maintain robust research and development programs, are actively expanding their CPO manufacturing capacity, and are well-positioned to compete vigorously for customers in the CPO segment. Luminos, in particular, has announced capital expenditures exceeding $200 million for CPO facility expansion in 2023 and 2024.
53. Paragraph 53. Defendant denies the allegations in Paragraph 53 and incorporates its responses to Paragraphs 51 and 52 by reference.
54. Paragraph 54. Defendant denies the Attorney General's allegations regarding harm to Oregon data-center customers. Defendant states that the acquisition enables Halcyon to deliver lower-cost, higher-performance CPO modules to all customers, including Oregon-based data-center operators such as Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC, by combining Meridian's silicon photonics design expertise with Halcyon's semiconductor manufacturing capabilities and supply chain efficiencies.
55. Paragraph 55. Defendant denies the allegations in Paragraph 55 and states that Oregon data-center customers have multiple alternative sources for CPO modules and are not dependent solely upon Meridian for their optical interconnect requirements.
56. Paragraph 56. Defendant denies the allegations in Paragraph 56 and incorporates its responses to Paragraphs 54 and 55 by reference.
57. Paragraph 57. Defendant denies all remaining allegations of anticompetitive effects set forth in Paragraph 57.
58. Paragraph 58. Defendant denies the allegations in Paragraph 58.
59. Paragraph 59. Defendant denies the allegations in Paragraph 59.
60. Paragraph 60. Defendant denies the allegations in Paragraph 60. Defendant states that the acquisition generates significant procompetitive efficiencies, including but not limited to: (a) vertical integration synergies resulting from the combination of Halcyon's analog and mixed-signal semiconductor design and manufacturing capabilities with Meridian's silicon photonics platform; (b) cost savings arising from shared manufacturing, procurement, and supply-chain infrastructure; (c) accelerated innovation through the combination of complementary intellectual property portfolios and engineering teams; and (d) expanded output and improved product offerings for customers across all segments.
H. Response to Allegations Regarding Relief Sought (Complaint ¶¶ 61–65)
61. Paragraph 61. Defendant denies that the State of Oregon is entitled to injunctive relief, divestiture, or any other equitable remedy in connection with the acquisition. The acquisition was lawfully consummated following federal HSR Act review and early termination, and the Attorney General has not demonstrated any cognizable basis for post-closing relief.
62. Paragraph 62. Defendant denies the allegations in Paragraph 62 and reiterates that no form of equitable relief is warranted.
63. Paragraph 63. Defendant denies the allegations in Paragraph 63.
64. Paragraph 64. Defendant denies that the State of Oregon is entitled to civil penalties under ORS 646.775 or any other provision of Oregon law. The acquisition does not violate ORS 646.730, and no basis exists for the imposition of penalties.
65. Paragraph 65. Defendant denies that the State of Oregon is entitled to an award of attorneys' fees, costs, or any other form of relief. Defendant further denies that the Attorney General is entitled to any relief whatsoever in this action.
II. GENERAL DENIAL
Defendant denies each and every allegation in the Complaint that is not expressly admitted in the foregoing responses. Without limiting the generality of the foregoing, Defendant specifically denies that the acquisition of Meridian Photonics Inc. violates ORS 646.730, ORS 646.775, or any other provision of Oregon law. Defendant further denies that the Plaintiff, the State of Oregon, is entitled to any of the relief sought in the Complaint, whether injunctive, equitable, monetary, or otherwise.
III. AFFIRMATIVE DEFENSES
Without assuming any burden of proof that would otherwise rest upon the Plaintiff, and without waiving any objections, defenses, or arguments otherwise available, Defendant asserts the following affirmative defenses:
First Affirmative Defense: Federal Preemption (HSR Act)
The Attorney General's claims are preempted by federal law. The acquisition at issue was subject to the pre-merger notification and review requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a (the "HSR Act"). The parties to the transaction filed the required notification with the Federal Trade Commission ("FTC") and the Antitrust Division of the United States Department of Justice ("DOJ") on October 3, 2022 (HSR File No. 20221003-1847). Following their review of the filing and the competitive implications of the proposed transaction, the FTC and DOJ granted early termination of the statutory waiting period on November 14, 2022, without issuing a request for additional information or documentary material (a "second request"). The federal agencies' decision to grant early termination reflects an affirmative determination, based on the information available to them, that the transaction did not warrant further investigation or challenge under federal antitrust law.
The federal government's clearance of the transaction under the HSR Act, and the comprehensive federal framework for pre-merger review established by the HSR Act and the Clayton Act, 15 U.S.C. § 18, preempts a post-closing state antitrust challenge to the same transaction, particularly where — as here — the federal enforcement agencies had a full opportunity to investigate and affirmatively chose not to challenge the merger. A state enforcement action that seeks to unwind or impose remedies on a transaction that the federal government has cleared under its exclusive pre-merger review framework is in conflict with, and stands as an obstacle to the accomplishment and execution of the full purposes and objectives of, the federal antitrust regulatory scheme. The Supremacy Clause of the United States Constitution, Article VI, Clause 2, bars such state enforcement actions.
Second Affirmative Defense: Failure to State a Claim
The Complaint fails to state facts sufficient to constitute a claim upon which relief may be granted under ORS 646.730, ORS 646.775, or any other provision of Oregon law. The Attorney General has not plausibly alleged a relevant product market, a relevant geographic market, or facts demonstrating that the acquisition may substantially lessen competition or tend to create a monopoly in any properly defined relevant market.
Specifically, the alleged product market of "co-packaged optics transceiver modules for data-center applications" is improperly narrow and fails to account for well-established demand-side and supply-side substitutability between CPO modules and other optical transceiver technologies, including pluggable optical transceivers in QSFP-DD and OSFP form factors, discrete silicon photonics components, and other optical interconnect solutions. The Attorney General's proposed market definition does not satisfy the hypothetical monopolist test and would not withstand scrutiny under applicable economic principles and legal precedent.
Similarly, the alleged geographic limitation to the United States, with particular emphasis on Oregon, is artificial and unsupported by the evidence. The CPO transceiver market is global in scope, with customers — including the Oregon-based customers identified in the Complaint — routinely sourcing from international suppliers. Transportation costs are negligible relative to product value, and no trade barriers exist that would constrain customers to domestic suppliers.
Third Affirmative Defense: Procompetitive Efficiencies
Even assuming, arguendo, that the Attorney General has properly defined the relevant market and has demonstrated a prima facie case of anticompetitive effects, the acquisition generates substantial procompetitive efficiencies that outweigh any alleged anticompetitive effects and that could not be achieved through means less restrictive than the merger. Specifically:
(a) The combination of Halcyon's analog and mixed-signal semiconductor expertise, power management integrated circuit capabilities, and advanced semiconductor manufacturing infrastructure with Meridian's portfolio of forty-seven (47) CPO-related United States patents and world-class silicon photonics design capabilities creates a vertically integrated platform uniquely positioned to deliver lower-cost, higher-performance CPO modules to customers;
(b) The acquisition enables accelerated innovation in CPO technology by combining complementary intellectual property portfolios, engineering teams, and research and development programs, thereby reducing time-to-market for next-generation products;
(c) The acquisition expands total output by enabling Halcyon to invest in and scale Meridian's manufacturing operations, including its Portland, Oregon facility, at a rate that Meridian could not have achieved independently; and
(d) These efficiencies are merger-specific, verifiable, and benefit consumers, including Oregon data-center operators such as Cascadia Cloud Services Inc. and Northstar Digital Infrastructure LLC.
Fourth Affirmative Defense: Failing-Firm / Weakened-Competitor Doctrine
Meridian's standalone CPO business was not sustainable as an independent enterprise over the long term. Absent the acquisition by Halcyon, Meridian faced significant capital constraints, intensifying competitive pressures from larger, better-capitalized rivals, and a need for substantial additional investment in manufacturing capacity and next-generation product development that exceeded its independent financial resources. These factors would have diminished Meridian's ability to compete independently and effectively in the CPO transceiver segment over time. The acquisition by Halcyon preserved Meridian's competitive assets — including its intellectual property, customer relationships, and experienced workforce — and preserved approximately 1,200 jobs, including those at Meridian's Portland, Oregon headquarters and operations.
Fifth Affirmative Defense: No Substantial Lessening of Competition
The Attorney General has failed to demonstrate that the acquisition may substantially lessen competition in any properly defined relevant market. The United States CPO transceiver market, which generated approximately Eight Hundred Seventy-Five Million Dollars ($875,000,000) in fiscal year 2022 revenue, is dynamic, rapidly growing, and characterized by significant ongoing innovation and relatively low barriers to entry and expansion. The market is populated by credible, well-funded competitors, including:
• Luminos Systems Corp. (Austin, Texas), with an estimated twenty-two percent (22%) share of United States CPO transceiver sales and a publicly announced multi-hundred-million-dollar capital expansion program;
• Crestwave Optical Technologies Ltd. (Shenzhen, China), with an estimated eleven percent (11%) share and growing international presence; and
• Other and fringe competitors, collectively holding approximately nine percent (9%) of United States CPO transceiver sales, including firms actively investing in CPO research and development.
The post-merger market remains competitive and contestable. While Defendant acknowledges that the post-merger HHI, as calculated under the Attorney General's proposed market definition, is approximately 4,050 (with a delta of approximately 1,232), HHI figures are not dispositive of competitive effects in any market, and are particularly unreliable as indicators of competitive harm in a high-growth, innovation-driven technology market where market shares are volatile, where new entry and expansion are ongoing, and where competitive conditions are driven primarily by innovation and product performance rather than by static market positions.
Sixth Affirmative Defense: Absence of Harm to Oregon Consumers
The Attorney General has not demonstrated any actual or threatened harm to Oregon consumers, businesses, or the public interest as a result of the acquisition. To the contrary, the acquisition benefits Oregon-based customers and the State of Oregon more broadly by ensuring a continued and enhanced supply of advanced CPO modules, by enabling Halcyon to invest further in Meridian's Portland operations and workforce, and by accelerating the development of next-generation optical interconnect technologies that will benefit Oregon's data-center industry and technology sector.
Seventh Affirmative Defense: Reservation of Additional Defenses
Defendant has not yet had the benefit of discovery in this action and has not had a full opportunity to investigate all facts relevant to this matter. Defendant therefore expressly reserves the right to assert additional affirmative defenses, and to amend or supplement the affirmative defenses set forth herein, as may become apparent through the course of discovery and further investigation of the facts and applicable law. Nothing in this Answer shall be construed as a waiver of any defense or argument available to Defendant.
IV. PRAYER FOR RELIEF
WHEREFORE, Defendant Halcyon Semiconductor Americas Inc. respectfully requests that this Court enter judgment in its favor and against the Plaintiff, and specifically requests the following relief:
1. That the Complaint be dismissed in its entirety, with prejudice, and that no further proceedings be had thereon;
2. That all relief sought by the State of Oregon be denied, including but not limited to injunctive relief, divestiture, civil penalties under ORS 646.775, and attorneys' fees and costs;
3. That Defendant be awarded its costs and disbursements incurred in connection with this action, to the fullest extent permitted by law; and
4. That this Court grant such other and further relief as it deems just, equitable, and proper.
V. DEMAND FOR JURY TRIAL
Defendant Halcyon Semiconductor Americas Inc. hereby demands a trial by jury on all issues so triable in this action, to the fullest extent permitted by the Oregon Constitution, the Oregon Rules of Civil Procedure, and applicable law. To the extent that any claims asserted in the Complaint are equitable in nature and not subject to trial by jury, Defendant reserves all rights with respect to such claims and acknowledges the equitable nature of the Attorney General's requests for injunctive and other equitable relief.
DATED: May 5, 2023
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Elaine Forsythe (admitted pro hac vice, application pending) Responsible Partner, Antitrust & Competition Practice Group 1301 Avenue of the Americas, 35th Floor New York, NY 10019 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Email: eforsythe@calderwoodharkness.com
Also: 555 California Street, Suite 2800 San Francisco, CA 94104 Telephone: (415) 772-1200
Aaron Liu (admitted pro hac vice, application pending) Lead Associate, Antitrust & Competition Practice Group 1301 Avenue of the Americas, 35th Floor New York, NY 10019 Telephone: (212) 558-4000
Email: aliu@calderwoodharkness.com
GRANTHAM DAVIS & KOWALSKI LLP
By: ________
Thomas Kowalski, OSB No. 041876 Partner, Local Counsel for Defendant 900 SW Fifth Avenue, Suite 2600 Portland, OR 97204 Telephone: (503) 224-3500 Facsimile: (503) 224-3501
Email: tkowalski@gdklaw.com
Attorneys for Defendant Halcyon Semiconductor Americas Inc.
CERTIFICATE OF SERVICE
I hereby certify that on May 5, 2023, I caused a true and correct copy of the foregoing ANSWER OF DEFENDANT HALCYON SEMICONDUCTOR AMERICAS INC. TO COMPLAINT to be served upon the following counsel of record by electronic filing through the Oregon Judicial Department's Odyssey File & Serve system and by electronic mail, in accordance with the Oregon Rules of Civil Procedure and the Multnomah County Supplementary Local Rules:
Counsel for Plaintiff:
Marcus Trujillo Senior Assistant Attorney General Antitrust Division Oregon Department of Justice 1162 Court Street NE Salem, OR 97301
Email: marcus.trujillo@doj.state.or.us
Constance Yee Derek Holmgren Ashworth & Pendleton LLP 1120 SW Third Avenue, Suite 1500 Portland, OR 97204
Email: cyee@ashworthpendleton.com
Email: dholmgren@ashworthpendleton.com
Outside Counsel for Plaintiff
By: ________
Thomas Kowalski, OSB No. 041876 GRANTHAM DAVIS & KOWALSKI LLP 900 SW Fifth Avenue, Suite 2600 Portland, OR 97204 Telephone: (503) 224-3500
Email: tkowalski@gdklaw.com
Dated: May 5, 2023
STATE OF OREGON, by and through | Case No. 23CV-18274
Attorney General Diane Calloway,
Hon. Robert Castañeda
Plaintiff,
ANSWER OF DEFENDANT
v. | HALCYON SEMICONDUCTOR
AMERICAS INC. TO COMPLAINT
HALCYON SEMICONDUCTOR AMERICAS INC.,
a Delaware corporation,
Defendant.

IN THE CIRCUIT COURT OF THE STATE OF OREGON FOR THE COUNTY OF MULTNOMAH

ANSWER OF DEFENDANT HALCYON SEMICONDUCTOR AMERICAS INC. TO COMPLAINT

I. RESPONSES TO ALLEGATIONS IN THE COMPLAINT

II. GENERAL DENIAL

III. AFFIRMATIVE DEFENSES

IV. PRAYER FOR RELIEF

V. DEMAND FOR JURY TRIAL

CALDERWOOD & HARKNESS LLP

GRANTHAM DAVIS & KOWALSKI LLP

CERTIFICATE OF SERVICE

ANSWER OF DEFENDANT

AMERICAS INC. TO COMPLAINT

HALCYON SEMICONDUCTOR AMERICAS INC.,

Record

Parties

Dates

Amounts