IN THE CIRCUIT COURT OF THE STATE OF OREGON FOR THE COUNTY OF MULTNOMAH
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I. PREAMBLE
This Final Judgment and Consent Decree ("Consent Decree" or "Decree") is entered into by and between the State of Oregon, by and through Attorney General Diane Calloway, acting through Senior Assistant Attorney General Marcus Trujillo of the Antitrust Division, Oregon Department of Justice ("Plaintiff" or "the State"), and Halcyon Semiconductor Americas Inc., a Delaware corporation with its principal place of business at 4500 Great America Parkway, Suite 300, Santa Clara, California 95054 ("Defendant" or "Halcyon Americas"), a wholly owned subsidiary of Halcyon Semiconductor AG, an Aktiengesellschaft organized under the laws of the Federal Republic of Germany with its principal offices at Ludwigstraße 27, 80539 Munich, Bavaria, Germany ("Halcyon Parent" or "HSAG," publicly traded on the Frankfurt Stock Exchange under the ticker symbol FSE: HLC).
Plaintiff is represented in this action by Senior Assistant Attorney General Marcus Trujillo of the Antitrust Division of the Oregon Department of Justice, and by outside special counsel Ashworth & Pendleton LLP, through its attorneys Constance Yee, Partner, and Derek Holmgren, Associate, with offices located at 1120 SW Third Avenue, Suite 1500, Portland, Oregon 97204.
Defendant is represented in this action by Calderwood & Harkness LLP, through its attorneys Elaine Forsythe, Responsible Partner, and Aaron Liu, Lead Associate, with offices located at 1301 Avenue of the Americas, 35th Floor, New York, New York 10019 and 555 California Street, Suite 2800, San Francisco, California 94104, and by Oregon local counsel Grantham Davis & Kowalski LLP, through its attorney Thomas Kowalski, Partner, with offices located at 900 SW Fifth Avenue, Suite 2600, Portland, Oregon 97204.
This Consent Decree is submitted jointly by the parties for entry by the Court as a Final Judgment resolving all claims asserted by Plaintiff against Defendant in this action. The parties have executed this Consent Decree as of November 1, 2023, and submit it to the Court for entry on the same date. The Court, having reviewed the proposed Consent Decree, the filings of the parties, and the record in this matter, enters this Consent Decree as a Final Judgment on November 8, 2023.
II. RECITALS
The Court makes the following findings based upon the record in this action and the submissions of the parties:
A. The Transaction
1. On September 8, 2022, Halcyon Semiconductor AG, acting through its wholly owned United States subsidiary Halcyon Semiconductor Americas Inc., entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Halcyon Americas agreed to acquire one hundred percent (100%) of the outstanding shares of capital stock of Meridian Photonics Inc. ("Meridian"), a Delaware corporation headquartered at 1820 NW Everett Street, Suite 400, Portland, Oregon 97209.
2. The aggregate consideration for the Acquisition was Two Billion One Hundred Fifty Million Dollars ($2,150,000,000), payable entirely in cash. The Acquisition was funded by a Two Billion Two Hundred Million Dollar ($2,200,000,000) senior secured term loan facility arranged by Vereinigte Kreditbank AG, acting as administrative agent, with syndicate members Nordmark Capital Group and Pacific Rim Commercial Bank, together with Fifty Million Dollars ($50,000,000) of cash on hand held by Halcyon Semiconductor AG and its subsidiaries.
3. Callister Blackwood & Co. served as the investment bank and financial advisor to Halcyon Semiconductor AG in connection with the negotiation and consummation of the Acquisition. Meridian's financial advisor in the transaction is not a party to this proceeding and its identity is not material to the resolution of this matter.
4. On October 3, 2022, the parties to the Merger Agreement filed the required notification and report forms pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a (the "HSR Act"), and the applicable rules promulgated by the Federal Trade Commission (HSR File No. 20221003-1847). On November 14, 2022, the Federal Trade Commission granted early termination of the statutory waiting period under the HSR Act. No second request for additional information or documentary material was issued by either the Federal Trade Commission or the Antitrust Division of the United States Department of Justice in connection with the Acquisition.
5. The Acquisition closed on January 31, 2023. Following the closing, Meridian Photonics Inc. continues to operate as a wholly owned subsidiary of Halcyon Semiconductor Americas Inc. and maintains its headquarters in Portland, Oregon.
6. Meridian Photonics Inc. is a designer and manufacturer of silicon photonics transceivers and co-packaged optics ("CPO") modules for data-center and telecommunications applications. Meridian has been recognized in the industry as a leading innovator in CPO technology, and its product lines include both 400ZR and 800ZR-compliant transceiver modules. As of the date of the Acquisition, Meridian held forty-seven (47) United States patents related to co-packaged optics technology, covering innovations in photonic integrated circuit design, optical interconnect architectures, thermal management for co-packaged modules, and related manufacturing processes.
7. Meridian's total revenue for its fiscal year ended December 31, 2022 ("FY 2022") was approximately Three Hundred Eighty-Five Million Dollars ($385,000,000). Based on publicly available data and estimates provided by the parties' respective economic experts during the course of discovery, the estimated total United States market for CPO transceiver modules for FY 2022 was approximately Eight Hundred Seventy-Five Million Dollars ($875,000,000).
B. The Complaint
8. On April 10, 2023, Plaintiff, through the Antitrust Division of the Oregon Department of Justice, issued a Civil Investigative Demand ("CID") to Halcyon Semiconductor Americas Inc. pursuant to ORS 646.760, requesting the production of documents and information related to the Acquisition and its effects on competition in the CPO transceiver market.
9. On April 17, 2023, Plaintiff filed a civil complaint in this Court, docketed as Case No. 23CV-18274, asserting claims under ORS 646.730 (prohibiting combinations in restraint of trade) and ORS 646.775 (granting the Attorney General authority to seek injunctive relief against unlawful business practices that may substantially lessen competition). The complaint alleged that the Acquisition of Meridian by Halcyon may substantially lessen competition in the market for co-packaged optics transceiver modules designed for data-center applications in the United States, with particular emphasis on the effects of the Acquisition on Oregon-based data-center customers who rely on Meridian's products.
10. Plaintiff alleged that, following consummation of the Acquisition, the combined Halcyon/Meridian entity would hold approximately fifty-eight percent (58%) of United States CPO transceiver sales by revenue, computed by combining Meridian's pre-merger market share of approximately forty-four percent (44%) with Halcyon's pre-existing legacy CPO market share of approximately fourteen percent (14%). Plaintiff further alleged that the Acquisition would result in a post-merger Herfindahl-Hirschman Index ("HHI") of approximately 4,050 in the relevant market, representing an increase of approximately 1,232 points from the pre-merger HHI of approximately 2,818. The post-merger HHI and the magnitude of the increase both significantly exceed the thresholds set forth in the applicable Horizontal Merger Guidelines for presumptively anticompetitive transactions.
11. Plaintiff further alleged that the Acquisition would eliminate Meridian Photonics Inc. as an independent, disruptive innovator in CPO technology, thereby reducing innovation competition in a market characterized by rapid technological change and significant barriers to entry. Plaintiff also alleged that Halcyon's vertically integrated position — as both a manufacturer of switch ASICs and, following the Acquisition, a dominant supplier of CPO transceiver modules — would enable Defendant to degrade the interoperability of CPO Modules with competitors' switch ASICs, raise rivals' costs, and foreclose competing CPO suppliers from effectively competing for the business of data-center operators.
12. Plaintiff identified two Oregon-based data-center operators as customers directly affected by the Acquisition: Cascadia Cloud Services Inc., which spent approximately Sixty-Two Million Dollars ($62,000,000) on Meridian CPO modules in FY 2022, and Northstar Digital Infrastructure LLC, which spent approximately Twenty-Eight Million Dollars ($28,000,000) on Meridian CPO modules in FY 2022. Both entities submitted declarations in support of Plaintiff's preliminary injunction motion attesting to their concerns about post-merger pricing, product availability, and interoperability.
13. In its complaint, Plaintiff sought injunctive relief, including but not limited to the potential divestiture of Meridian Photonics Inc. or its CPO business, behavioral remedies to preserve competition, and such other and further relief as the Court might deem just and equitable.
C. Proceedings
14. On May 5, 2023, Defendant filed its Answer to the complaint, denying the material allegations of the complaint and asserting affirmative defenses including, inter alia, federal preemption under the HSR Act and the dormant Commerce Clause, procompetitive efficiencies generated by the Acquisition, failure by Plaintiff to demonstrate a substantial lessening of competition in any properly defined relevant market, and the availability of timely and sufficient entry by new competitors to counteract any anticompetitive effects.
15. On May 19, 2023, Defendant filed a Motion to Dismiss the complaint pursuant to ORCP 21, arguing that Plaintiff's claims were preempted by federal antitrust law and that the complaint failed to allege facts sufficient to establish a prima facie violation of ORS 646.730 or ORS 646.775. On July 7, 2023, the Court denied Defendant's Motion to Dismiss in its entirety, holding that Plaintiff's claims were not preempted and that the complaint stated plausible claims for relief under Oregon law.
16. Following the denial of Defendant's Motion to Dismiss, discovery commenced on July 21, 2023. The parties exchanged initial disclosures and commenced the production of documents responsive to discovery requests.
17. On August 15, 2023, Plaintiff filed a Motion for Preliminary Injunction, seeking an order imposing behavioral restrictions on Defendant pending trial, including interim non-discrimination obligations in the supply of CPO Modules and restrictions on modifications to the interoperability of CPO Modules with Third-Party Switch ASICs.
18. On September 8, 2023, Defendant filed its Opposition to Plaintiff's Motion for Preliminary Injunction, arguing that Plaintiff had failed to demonstrate irreparable harm or a likelihood of success on the merits. Defendant's opposition was supported by the Declaration of Dr. Franklin Morrow of Stonebridge Analytics LLC, an economic consulting firm, who opined that the relevant market was broader than alleged, that barriers to entry were lower than Plaintiff contended, and that the Acquisition would generate substantial procompetitive efficiencies.
19. On September 22, 2023, the Court held an evidentiary hearing on Plaintiff's Motion for Preliminary Injunction. At the conclusion of the hearing, the Court took the motion under advisement and strongly encouraged the parties to engage in settlement discussions, noting the complexity of the issues presented and the potential for a negotiated resolution that would protect competition without the delay and expense of a full trial.
20. On October 6, 2023, at the direction and encouragement of the Court, the parties commenced formal mediation before court-appointed mediator Hon. Patricia Loomis (Ret.), a former Judge of the Multnomah County Circuit Court and experienced mediator of complex commercial and antitrust disputes.
21. On October 20, 2023, following two full days of mediation sessions and subsequent direct negotiations between counsel, the parties agreed to a term sheet setting forth the principal terms of this Consent Decree. Thereafter, the parties negotiated and drafted this Consent Decree, which memorializes the terms of their agreement.
D. Purpose and Agreement
22. The parties have negotiated this Consent Decree in good faith and at arm's length to resolve all claims asserted in the complaint filed in this action, without any admission of liability by Defendant and without further litigation. The parties believe that the terms of this Consent Decree represent a fair, reasonable, and adequate resolution of the dispute.
23. Defendant denies all allegations of wrongdoing contained in the complaint and enters into this Consent Decree solely to avoid the expense, burden, distraction, and uncertainty of further litigation, and without conceding the merits of any of Plaintiff's claims or the validity of any of Plaintiff's legal or factual theories.
24. Plaintiff believes that the terms of this Consent Decree, including the FRAND licensing commitment, interoperability obligations, non-discrimination requirements, compliance monitoring provisions, and civil penalty, adequately protect competition and Oregon consumers in the relevant market for CPO transceiver modules for data-center applications.
25. The parties agree that entry of this Consent Decree is in the public interest and that the behavioral remedies and compliance provisions set forth herein are sufficient to address the competitive concerns raised in the complaint without requiring divestiture of Meridian Photonics Inc. or its assets.
26. This Consent Decree does not constitute evidence of, or an admission of, any violation of ORS Chapter 646, the Sherman Antitrust Act, the Clayton Act, Section 5 of the Federal Trade Commission Act, or any other state, federal, or foreign law or regulation. Entry of this Consent Decree shall not give rise to any inference of wrongdoing by Defendant in any proceeding, whether judicial, administrative, regulatory, or otherwise.
III. JURISDICTION AND VENUE
27. This Court has subject matter jurisdiction over the claims asserted in this action pursuant to ORS 646.775, which authorizes the Attorney General to bring actions in the circuit courts of this state to prevent, restrain, or remedy violations of ORS 646.730. This Court has personal jurisdiction over Defendant, which has transacted business in Oregon, maintains significant business relationships with Oregon-based customers, and has consented to the jurisdiction of this Court for purposes of this action.
28. Venue is proper in Multnomah County, Oregon, pursuant to ORS 14.080, because Defendant's subsidiary Meridian Photonics Inc. maintains its principal place of business in Multnomah County, and a substantial part of the events or omissions giving rise to the claims asserted in this action occurred in Multnomah County.
29. Defendant hereby consents to the continuing jurisdiction of this Court for all purposes relating to the implementation, interpretation, enforcement, and modification of this Consent Decree during the Term and until all obligations arising hereunder have been satisfied in full.
30. The Court shall retain jurisdiction over this matter for the duration of this Consent Decree and for such additional period as may be necessary to resolve any disputes arising under or related to the Consent Decree, to enforce compliance with the Consent Decree, and to adjudicate any motions for modification or early termination filed pursuant to Section XIII hereof.
IV. DEFINITIONS
31. As used in this Consent Decree, the following terms shall have the meanings ascribed to them below:
(a) "Acquisition" means the acquisition of one hundred percent (100%) of the outstanding shares of capital stock of Meridian Photonics Inc. by Halcyon Semiconductor Americas Inc. pursuant to the Agreement and Plan of Merger dated September 8, 2022, which transaction closed on January 31, 2023.
(b) "Compliance Monitor" means Kirkdale Compliance Group LLC, an independent compliance monitoring firm with offices at 233 South Wacker Drive, Suite 4100, Chicago, Illinois 60606, as appointed pursuant to Section IX of this Decree, and any successor monitor appointed by order of this Court.
(c) "Consent Decree" or "Decree" means this Final Judgment and Consent Decree, including all exhibits attached hereto, as it may be amended or modified from time to time in accordance with Section XIII hereof.
(d) "CPO Modules" means co-packaged optics transceiver modules designed, manufactured, marketed, distributed, or sold by Meridian Photonics Inc. (or its successors or assigns), including without limitation 400ZR-compliant and 800ZR-compliant coherent optics transceivers, and any next-generation CPO transceiver modules developed, designed, or manufactured by Meridian or Defendant during the Term that are marketed for data-center or telecommunications applications.
(e) "CPO Patents" means the forty-seven (47) United States patents held by Meridian Photonics Inc. as of the date of this Decree that relate to co-packaged optics technology, as identified and listed in Exhibit A attached hereto and incorporated herein by reference.
(f) "Defendant" means Halcyon Semiconductor Americas Inc., a Delaware corporation, together with its direct and indirect parent entity Halcyon Semiconductor AG, and all of their respective officers, directors, agents, employees, subsidiaries (including but not limited to Meridian Photonics Inc.), affiliates, successors, and assigns.
(g) "Effective Date" means the date on which this Consent Decree is entered by the Court as a Final Judgment, which date is November 8, 2023.
(h) "FRAND Terms" means Fair, Reasonable, and Non-Discriminatory terms, as that term is commonly understood and applied in the technology licensing industry, including in the context of standards-essential patent licensing. FRAND Terms require that royalty rates reflect the incremental value attributable to the patented technology, that similarly situated licensees be offered substantially similar terms, and that license agreements not impose conditions unrelated to the licensed intellectual property rights.
(i) "Halcyon Components" means any semiconductor component designed, manufactured, marketed, distributed, or sold by Halcyon Semiconductor AG, Halcyon Semiconductor Americas Inc., or any of their subsidiaries or affiliates, other than CPO Modules, including without limitation analog and mixed-signal semiconductors, power management integrated circuits, switch application-specific integrated circuits ("ASICs"), field-programmable gate arrays, and any other semiconductor products.
(j) "Meridian" means Meridian Photonics Inc., a Delaware corporation and wholly owned subsidiary of Halcyon Semiconductor Americas Inc., with its principal place of business at 1820 NW Everett Street, Suite 400, Portland, Oregon 97209, and any successor entity or division operating the former business of Meridian Photonics Inc.
(k) "OIF Standards" means the technical specifications and implementation agreements published by the Optical Internetworking Forum (OIF), a nonprofit industry consortium, for 400ZR and 800ZR coherent optics interfaces, as such specifications exist on the Effective Date and as they may be updated, amended, supplemented, or superseded during the Term. References to OIF Standards shall include any successor standards adopted by the OIF that address coherent optics interfaces at data rates of 400 Gbps or higher.
(l) "Plaintiff" or "the State" means the State of Oregon, by and through the Attorney General of the State of Oregon and the Antitrust Division of the Oregon Department of Justice, together with any successor in office.
(m) "Requesting Licensee" means any person or entity, wherever organized or domiciled, that submits a bona fide written request to Defendant for a license to practice any one or more of the CPO Patents, provided that such person or entity has a legitimate business purpose for seeking such a license and is not seeking the license for the sole purpose of asserting the licensed patents against third parties.
(n) "Term" means the five (5) year period commencing on the Effective Date and expiring at 11:59 p.m. Pacific Time on November 8, 2028, unless earlier terminated or extended by order of this Court pursuant to Section XIII or Section XV of this Decree.
(o) "Third-Party Switch ASICs" means application-specific integrated circuits designed and manufactured by entities other than Defendant, including Defendant's affiliates and subsidiaries, and used as switch processors, routing processors, or network processing units in data-center networking equipment, including but not limited to top-of-rack switches, spine switches, and leaf switches.
V. APPLICABILITY
32. This Consent Decree shall be binding upon Defendant and upon all of its officers, directors, agents, employees, subsidiaries (including but not limited to Meridian Photonics Inc.), affiliates, successors, and assigns. Defendant shall ensure that all persons and entities subject to this Consent Decree are made aware of its terms and comply with its requirements.
33. Within ten (10) business days of the Effective Date, Defendant shall provide a true and correct copy of this Consent Decree to all officers and members of senior management of Halcyon Semiconductor Americas Inc. and Meridian Photonics Inc., including but not limited to each entity's chief executive officer, chief operating officer, chief financial officer, chief technology officer, general counsel, and all vice presidents and senior vice presidents. Defendant shall obtain and retain a written acknowledgment of receipt from each such individual.
34. In the event that Defendant, during the Term, sells, transfers, assigns, or otherwise conveys all or any substantial portion of Meridian's assets, business operations, or intellectual property (including any or all of the CPO Patents) to any third party, Defendant shall, as a condition of such sale, transfer, assignment, or conveyance, require the acquiror or transferee to assume in writing all of the obligations imposed on Defendant under this Consent Decree with respect to the transferred assets or intellectual property. Defendant shall provide written notice to the Plaintiff and the Compliance Monitor of any such transaction at least thirty (30) days prior to the consummation thereof, together with a copy of the instrument by which the acquiror or transferee assumes the obligations of this Consent Decree.
VI. FRAND LICENSING COMMITMENT
A. Obligation
35. During the Term, Defendant shall offer and make available to any Requesting Licensee a license to any or all of the CPO Patents on FRAND Terms. The FRAND licensing obligation imposed by this Section is intended to ensure that the competitive benefits of Meridian's CPO patent portfolio remain available to the broader market and that the Acquisition does not enable Defendant to foreclose competitors from practicing essential CPO technology.
36. Defendant shall not unreasonably withhold, delay, or condition the grant of any license to the CPO Patents. Defendant shall not require, as a condition of granting a license, that the Requesting Licensee agree to purchase or use Halcyon Components, enter into any exclusive dealing arrangement with Defendant, or accept any restriction on the Requesting Licensee's ability to purchase or use products or components manufactured by Defendant's competitors.
37. FRAND Terms shall include, at a minimum, the following elements:
(i) Royalty rates that are fair and reasonable in light of the scope, validity, and value of the licensed patents, taking into account the contribution of the patented technology to the value of the end product, the availability of non-infringing alternatives (if any), the royalty rates established in comparable license agreements, and such other factors as are customarily considered in determining FRAND royalty rates;
(ii) Non-discriminatory treatment among similarly situated Requesting Licensees, such that Defendant does not offer materially more favorable license terms to its own affiliates or to customers that purchase Halcyon Components than it offers to unaffiliated Requesting Licensees or to customers that purchase competing products; and
(iii) License terms that do not impose conditions unrelated to the licensed intellectual property, including but not limited to grantback provisions requiring the Requesting Licensee to license its own patents to Defendant on terms other than FRAND Terms, exclusive purchasing requirements, or non-compete restrictions.
B. Procedures
38. Within thirty (30) days of the Effective Date, Defendant shall establish and maintain a licensing desk or designated point of contact, staffed by qualified personnel with authority to negotiate and execute license agreements, to receive and process requests from Requesting Licensees for licenses to the CPO Patents. Defendant shall publish the contact information for the licensing desk on the Meridian Photonics Inc. website and shall provide such contact information to any person or entity that inquires about obtaining a license to the CPO Patents.
39. Defendant shall respond to any bona fide written license request from a Requesting Licensee within sixty (60) calendar days of receipt of such request. The response shall include either: (a) a written offer of license terms setting forth the proposed royalty rate, the scope of the license (including the specific patents to be licensed and the permitted fields of use), the proposed duration of the license, and all other material terms; or (b) a written explanation of the basis for any refusal to grant a license, which basis must be objectively reasonable and consistent with the requirements of this Section.
40. In the event that Defendant and a Requesting Licensee are unable to agree upon FRAND Terms within ninety (90) calendar days following the date of Defendant's initial response to the license request, either Defendant or the Requesting Licensee may invoke the dispute resolution procedures set forth in Section XII of this Decree, and the matter shall be subject to resolution in accordance with those procedures. Pending resolution of any such dispute, Defendant shall not seek or obtain injunctive relief against the Requesting Licensee for infringement of the CPO Patents in any court or before any administrative body, provided that the Requesting Licensee is negotiating in good faith and has offered to be bound by FRAND Terms as determined through the dispute resolution process.
C. Scope
41. The FRAND licensing obligation set forth in this Section VI covers all forty-seven (47) CPO Patents identified in Exhibit A attached hereto, as well as any continuations, continuations-in-part, divisionals, reissues, or reexaminations thereof that are filed, issued, or pending during the Term. The obligation also extends to any foreign counterpart patents or patent applications corresponding to the CPO Patents, to the extent that such foreign counterpart patents or applications are owned or controlled by Defendant during the Term.
VII. INTEROPERABILITY OBLIGATION
A. Backward Compatibility
42. During the Term, Defendant shall maintain backward-compatible interoperability between CPO Modules and Third-Party Switch ASICs that conform to OIF Standards (400ZR and 800ZR), as those standards exist on the Effective Date and as they may be updated, amended, or supplemented during the Term by the Optical Internetworking Forum. Defendant shall ensure that CPO Modules continue to function properly and deliver their specified performance when used in conjunction with OIF-compliant Third-Party Switch ASICs, without requiring the use of proprietary adapters, middleware, firmware, or other interface components that are available only from Defendant.
43. Defendant shall not take any action, whether through hardware design, firmware modification, software update, or otherwise, to degrade, disable, limit, or impair the interoperability of CPO Modules with OIF-compliant Third-Party Switch ASICs. This prohibition extends to actions that would reduce the performance, functionality, reliability, or data throughput of CPO Modules when used with Third-Party Switch ASICs, as compared to the performance achieved when CPO Modules are used with Halcyon-manufactured switch ASICs under comparable conditions.
B. Testing and Certification
44. Defendant shall conduct interoperability testing at least annually during the Term, using commercially available Third-Party Switch ASICs from at least two (2) independent vendors that are not affiliates of Defendant. The testing methodology shall be consistent with industry-standard testing protocols, including those promulgated or recommended by the Optical Internetworking Forum, and shall be designed to verify that CPO Modules operate in full compliance with OIF Standards when used with Third-Party Switch ASICs.
45. Defendant shall make the results of each annual interoperability test available to the Compliance Monitor within thirty (30) days of the completion of such testing. The test results shall include, at a minimum, the identification of the Third-Party Switch ASICs tested, the specific CPO Module models tested, the testing methodology employed, the test environment and configuration, and a summary of the results, including any failures, incompatibilities, or performance degradations observed.
46. Upon reasonable request from any third-party equipment manufacturer, Defendant shall make available technical documentation sufficient to enable such manufacturer to independently test the interoperability of its products with CPO Modules. Such technical documentation shall include, at a minimum, published datasheets, interface specifications, and application notes. Defendant may require the requesting manufacturer to execute a reasonable non-disclosure agreement prior to receiving any documentation that constitutes confidential or proprietary information, provided that the terms of such non-disclosure agreement are not more restrictive than those customarily required in the industry and do not impose conditions that would effectively prevent the manufacturer from conducting interoperability testing.
C. New Product Releases
47. Any new CPO Module model or product version released by Defendant during the Term shall be designed to comply with the then-current OIF Standards for coherent optics interfaces at data rates of 400 Gbps or higher, and shall be backward-compatible with OIF-compliant Third-Party Switch ASICs, consistent with the obligations set forth in Sections VII.A and VII.B of this Decree. Defendant shall conduct interoperability testing of any new CPO Module prior to its commercial release and shall make the results of such testing available to the Compliance Monitor.
48. Nothing in this Section VII shall be construed to prohibit Defendant from developing and offering proprietary features or enhancements that extend beyond the requirements of OIF Standards, provided that: (a) the baseline OIF-compliant interoperability of the CPO Module is maintained; and (b) any proprietary features or enhancements are offered in addition to, and not as a replacement for, OIF-standard functionality.
VIII. NON-DISCRIMINATION IN SUPPLY
A. Prohibition on Tying
49. During the Term, Defendant shall not condition, directly or indirectly, the sale, supply, availability, pricing, delivery priority, or allocation of CPO Modules to any customer on that customer's purchase, licensing, use, or continued use of any Halcyon Components. This prohibition includes, but is not limited to, the following practices:
(i) Requiring or incentivizing a customer to purchase Halcyon Components as a condition of receiving CPO Modules at a particular price, in a particular quantity, or within a particular delivery timeframe;
(ii) Offering discounts, rebates, credits, or other financial incentives on CPO Modules that are contingent upon the customer's purchase of Halcyon Components;
(iii) Bundling CPO Modules with Halcyon Components in a manner that is not also available on an unbundled basis at commercially reasonable prices; and
(iv) Refusing to sell or supply CPO Modules to a customer that declines to purchase Halcyon Components.
B. Equal Treatment
50. Defendant shall make CPO Modules available to all customers on commercially reasonable and non-discriminatory terms, including with respect to pricing, delivery schedules, lead times, allocation during periods of supply constraints, warranty terms, technical support, and access to product roadmap information. Defendant shall not offer materially more favorable terms to customers that also purchase Halcyon Components than to customers that do not, unless such differential treatment is based on legitimate, objective, and non-pretextual business justifications such as volume commitments, creditworthiness, or the cost of serving particular customer accounts.
51. In the event of a supply shortage or allocation constraint affecting CPO Modules, Defendant shall allocate available supply among customers on a fair, transparent, and non-discriminatory basis, taking into account existing contractual commitments, historical purchase volumes, and customer order dates, and without favoring customers that purchase Halcyon Components over customers that purchase competing products.
C. Anti-Retaliation
52. Defendant shall not retaliate against, discriminate against, or take any adverse action against any customer, supplier, distributor, or business partner that purchases or uses Third-Party Switch ASICs or other semiconductor components manufactured by Defendant's competitors. For purposes of this Section, "adverse action" includes, but is not limited to, price increases not justified by cost changes, supply reductions, extended delivery times, degradation of technical support, refusal to provide product samples or evaluation units, and exclusion from early access programs or product launch events.
53. Defendant shall not communicate to any customer, directly or indirectly, any threat of adverse consequences should the customer elect to purchase or use products manufactured by Defendant's competitors, and shall instruct its sales, marketing, and account management personnel accordingly.
IX. COMPLIANCE MONITOR
A. Appointment
54. Kirkdale Compliance Group LLC, an independent compliance consulting firm with offices at 233 South Wacker Drive, Suite 4100, Chicago, Illinois 60606, is hereby appointed as the independent Compliance Monitor for the duration of the Term. The Compliance Monitor has been selected by agreement of the parties and approved by the Court as a qualified and independent entity with expertise in antitrust compliance, technology industry practices, and intellectual property licensing.
55. The Compliance Monitor shall act independently and impartially at all times and shall not be subject to the direction, control, or influence of Defendant, Defendant's parent company, or any of Defendant's officers, directors, employees, agents, affiliates, or counsel. The Compliance Monitor shall owe its duties to the Court and shall perform its functions in a manner designed to ensure Defendant's compliance with all provisions of this Consent Decree.
B. Authority and Access
56. The Compliance Monitor shall have full and complete access to Defendant's books, records, correspondence, internal communications, financial data, contracts, licensing agreements, technical documentation, personnel, and facilities, to the extent reasonably necessary to assess Defendant's compliance with each provision of this Decree. This access shall include, but not be limited to:
(i) Review of all license agreements, license negotiations, and license requests related to the CPO Patents;
(ii) Review of CPO Module pricing, allocation, and supply records for all customers;
(iii) Interviews with Defendant's officers, employees, and agents, including personnel in the sales, licensing, engineering, product management, and legal departments;
(iv) Inspection of interoperability testing facilities, procedures, and results;
(v) Review of internal communications, including emails and memoranda, relating to the matters covered by this Decree; and
(vi) Access to Meridian's facilities in Portland, Oregon, and to Defendant's other facilities as reasonably necessary.
57. Defendant shall cooperate fully and promptly with the Compliance Monitor and shall not impede, obstruct, delay, or interfere with the Compliance Monitor's activities. Defendant shall respond to requests for information from the Compliance Monitor within ten (10) business days unless a longer period is agreed upon by the Compliance Monitor. Defendant shall designate a senior officer or member of management as the primary point of contact for the Compliance Monitor.
C. Reporting
58. The Compliance Monitor shall submit semi-annual written reports to the Oregon Attorney General's office, directed to the attention of the Senior Assistant Attorney General, Antitrust Division, Oregon Department of Justice, assessing Defendant's compliance with each provision of this Decree. Each report shall address, at a minimum:
(i) The status of the FRAND licensing program, including the number and identity of Requesting Licensees, the status of negotiations, licenses granted, and any disputes;
(ii) Defendant's compliance with the interoperability obligations, including the results of any interoperability testing conducted during the reporting period;
(iii) Defendant's compliance with the non-discrimination and anti-tying obligations, including any complaints received from customers;
(iv) Any instances of non-compliance or potential non-compliance identified by the Compliance Monitor; and
(v) Recommendations, if any, for corrective action or enhanced compliance measures.
59. Reports shall be due on May 8 and November 8 of each year during the Term, with the first report due on May 8, 2024, and the final report due on November 8, 2028. Each report shall be submitted simultaneously to the Oregon Attorney General's office and to counsel for Defendant.
60. In the event that the Compliance Monitor identifies or becomes aware of any material non-compliance with the terms of this Consent Decree between regularly scheduled reporting periods, the Compliance Monitor shall promptly notify the Oregon Attorney General's office of such non-compliance, in writing, within five (5) business days of discovery. The Compliance Monitor shall simultaneously provide a copy of such notification to counsel for Defendant.
D. Fees and Expenses
61. All fees and expenses of the Compliance Monitor incurred in connection with the performance of its duties under this Consent Decree shall be borne exclusively by Defendant. The estimated annual cost of the Compliance Monitor's services is One Hundred Seventy-Five Thousand Dollars ($175,000) per year, for an estimated total cost of Eight Hundred Seventy-Five Thousand Dollars ($875,000) over the five (5) year Term. The actual fees and expenses may vary based on the scope and complexity of the Compliance Monitor's activities and shall be billed on an hourly basis at the Compliance Monitor's standard rates, subject to the foregoing estimate.
62. Defendant shall pay the Compliance Monitor's fees and expenses within thirty (30) days of the date of each invoice. Failure to timely pay the Compliance Monitor's fees and expenses shall constitute a violation of this Consent Decree and may be grounds for enforcement proceedings under Section XIV hereof.
E. Removal and Replacement
63. The Compliance Monitor may be removed or replaced only by order of this Court, upon motion by either party for good cause shown. Good cause for removal or replacement may include, but is not limited to, the Compliance Monitor's inability to perform its duties, a conflict of interest, or a material failure to comply with the requirements of this Section. In the event of removal, the Court shall appoint a successor Compliance Monitor upon recommendation of the parties or, in the absence of agreement, upon the Court's own motion.
X. CIVIL PENALTY
64. Defendant shall pay a civil penalty in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) to the State of Oregon within thirty (30) calendar days of the Effective Date. This civil penalty is imposed pursuant to the authority granted to the Attorney General under ORS 646.775 and represents a negotiated resolution of Plaintiff's claims.
65. Payment shall be made by wire transfer to an account designated by the Oregon Department of Justice, or by certified check made payable to the "Oregon Department of Justice" and delivered to the Oregon Department of Justice at the address set forth in Section XVIII of this Decree. The specific wire transfer instructions shall be provided by Plaintiff to Defendant's counsel within five (5) business days of the Effective Date.
66. The civil penalty imposed by this Section is intended to constitute a penalty paid to a government for the violation of a law and, to the extent provided by Section 162(f) of the Internal Revenue Code of 1986, as amended, and ORS 316.680(2)(a), is not deductible as a business expense for federal or state income tax purposes. Defendant acknowledges and agrees that it will not claim a deduction for the civil penalty on any tax return.
XI. NO DIVESTITURE
67. This Consent Decree does not require, and neither party seeks, the divestiture by Defendant of Meridian Photonics Inc. or any portion of Meridian's business operations, assets, or intellectual property. The parties agree that the behavioral remedies and compliance measures set forth in this Decree are sufficient to address the competitive concerns raised in the complaint and that divestiture is not necessary or appropriate under the circumstances.
68. Nothing in this Consent Decree shall be construed to limit or restrict Defendant's right to continue operating Meridian Photonics Inc. as a wholly owned subsidiary, to integrate Meridian's operations, personnel, technology, and product lines with Defendant's existing business operations, or to realize the operational and technological synergies anticipated from the Acquisition, in each case subject to and consistent with the obligations set forth in Sections VI, VII, and VIII of this Decree.
XII. DISPUTE RESOLUTION
A. Good Faith Negotiation
69. In the event of any dispute arising under or relating to this Consent Decree, including but not limited to disputes concerning the interpretation of its terms, alleged non-compliance, the determination of FRAND Terms under Section VI, or the scope of the Compliance Monitor's authority, the parties shall first attempt to resolve the dispute through good faith negotiation for a period of thirty (30) calendar days, commencing on the date that one party delivers to the other party written notice describing the nature of the dispute and the relief sought.
B. Mediation
70. If the dispute is not resolved through good faith negotiation within the thirty (30) day negotiation period, either party may request mediation by delivering written notice of such request to the other party and to the mediator. The mediator for all disputes arising under this Consent Decree shall be Hon. Patricia Loomis (Ret.) or, if she is unavailable or unable to serve, a mediator appointed by this Court upon application of either party. Mediation shall be conducted in Portland, Oregon, unless the parties agree otherwise in writing.
71. The costs and fees of mediation, including the mediator's fees and the costs of any mediation facilities, shall be shared equally by the parties. Each party shall bear its own attorneys' fees and costs incurred in connection with the mediation.
C. Court Resolution
72. If mediation does not resolve the dispute within sixty (60) calendar days of the commencement of mediation, either party may apply to this Court for resolution of the dispute. The Court retains jurisdiction to interpret, enforce, and modify this Consent Decree as provided herein. In any proceeding before the Court to resolve a dispute arising under this Decree, the Court may award such relief as it deems just and appropriate, including declaratory relief, specific performance, injunctive relief, and monetary sanctions.
73. The dispute resolution procedures set forth in this Section XII shall not apply to motions for civil contempt or enforcement proceedings brought by the State under Section XIV of this Decree, which may be brought directly before this Court at any time without the prior completion of negotiation or mediation.
XIII. MODIFICATION
74. This Consent Decree may be modified only by written agreement of the parties, approved by this Court, or by order of this Court upon motion by either party. Any proposed modification shall be submitted to the Court in writing, together with a statement of the reasons therefor and evidence supporting the proposed modification.
75. Either party may move this Court to modify this Consent Decree upon a showing of changed circumstances, supervening events, or other good cause that warrants a modification of the terms of the Decree. The moving party shall bear the burden of demonstrating that modification is warranted.
76. Defendant may seek early termination of the behavioral obligations set forth in Sections VI (FRAND Licensing Commitment), VII (Interoperability Obligation), and VIII (Non-Discrimination in Supply) of this Decree upon a showing that market conditions in the CPO transceiver industry have substantially changed since the Effective Date such that the obligations are no longer necessary to protect competition in the relevant market. In evaluating any such motion, the Court shall consider, among other factors, changes in market concentration, the emergence of new competitors, changes in technology or industry standards, and the opinions of the Compliance Monitor and the Oregon Attorney General. No motion for early termination under this Section may be filed earlier than three (3) years after the Effective Date — that is, no earlier than November 8, 2026.
XIV. ENFORCEMENT AND CONSEQUENCES OF NON-COMPLIANCE
77. In the event of a material violation of any provision of this Consent Decree, the State may apply to this Court for such relief as may be appropriate to remedy the violation and to ensure future compliance, including but not limited to:
(i) An order of civil contempt;
(ii) Additional or modified injunctive relief;
(iii) Monetary sanctions, including compensatory and coercive sanctions;
(iv) Extension of the Term of this Consent Decree; and
(v) Such other and further relief as the Court may deem just and equitable under the circumstances.
78. In any enforcement action brought by the State in which the Court finds that Defendant has materially violated any provision of this Consent Decree, Defendant shall pay to the State the reasonable attorneys' fees, costs, and expenses incurred by the State in connection with such enforcement action, including the fees and costs of outside counsel and expert consultants.
79. Continued, repeated, or willful violations of this Consent Decree may be grounds for the State to seek additional remedies beyond those set forth above, including but not limited to the divestiture of Meridian Photonics Inc. or its CPO business, the disgorgement of profits attributable to the violation, and the imposition of additional structural or behavioral relief. The Court shall retain discretion to fashion such remedies as are necessary and appropriate to vindicate the purposes of this Decree and to protect competition in the relevant market.
XV. TERM AND EXPIRATION
80. This Consent Decree shall remain in full force and effect for a period of five (5) years from the Effective Date, commencing on November 8, 2023, and expiring at 11:59 p.m. Pacific Time on November 8, 2028, unless earlier terminated or extended by order of this Court pursuant to Sections XIII or XIV of this Decree.
81. Upon the expiration of the Term, the behavioral obligations set forth in Section VI (FRAND Licensing Commitment), Section VII (Interoperability Obligation), Section VIII (Non-Discrimination in Supply), and Section IX (Compliance Monitor) shall terminate automatically, and Defendant shall have no further obligations under those Sections, unless the Term has been extended by order of this Court prior to its expiration.
82. The civil penalty obligation set forth in Section X shall survive and is not subject to the Term. The obligation to pay the civil penalty shall remain in effect regardless of the expiration of the Term and shall be enforceable by the State at any time.
83. The provisions of Sections XVI (No Admission of Liability), XVII (Release and Waiver), XIX (Entire Agreement), XX (Governing Law), and XXI (Severability) shall survive the expiration or termination of this Consent Decree.
XVI. NO ADMISSION OF LIABILITY
84. Entry of this Consent Decree does not constitute, and shall not be construed as, an admission by Defendant of any violation of ORS 646.730, ORS 646.775, or any other provision of ORS Chapter 646, or any other state, federal, or foreign statute, regulation, or common law principle. Defendant expressly denies all allegations of wrongdoing contained in the complaint filed in this action and enters into this Consent Decree solely for the purpose of resolving this litigation and avoiding the expense, burden, distraction, and uncertainty of further proceedings.
85. Nothing in this Consent Decree shall be used as evidence of, or as an admission of, liability, wrongdoing, or any violation of law by Defendant in any other judicial, administrative, regulatory, or arbitral proceeding, whether pending or future, in any jurisdiction. This provision shall not, however, prevent the State from offering this Consent Decree into evidence in any proceeding brought to enforce the terms of this Decree.
XVII. RELEASE AND WAIVER
86. Upon entry of this Consent Decree and payment in full of the civil penalty set forth in Section X, Plaintiff hereby releases and forever discharges Defendant, its parent company Halcyon Semiconductor AG, and their respective officers, directors, employees, agents, subsidiaries (including Meridian Photonics Inc.), affiliates, predecessors, successors, and assigns from any and all claims, causes of action, demands, damages, penalties, fines, and liabilities of any kind or nature, whether known or unknown, arising from or related to the Acquisition that were asserted or could have been asserted in the complaint filed in this action (Case No. 23CV-18274).
87. This release does not extend to, and Plaintiff expressly reserves, any and all claims, causes of action, and remedies arising from Defendant's failure to comply with the terms of this Consent Decree. The State's right to enforce the provisions of this Decree and to seek all available remedies for non-compliance, as set forth in Section XIV, is fully preserved.
88. This release does not extend to any claims arising from future transactions, acquisitions, mergers, or conduct by Defendant that are not addressed by this Consent Decree. The State expressly reserves its right to investigate and prosecute any future conduct by Defendant that may violate ORS Chapter 646 or any other applicable law, including but not limited to any future acquisition by Defendant of a competitor in any relevant market.
XVIII. NOTICES
89. All notices, communications, reports, and other documents required or permitted under this Consent Decree shall be in writing and shall be deemed duly delivered and received when delivered by hand, when sent by nationally recognized overnight courier service with tracking and confirmation of delivery, or when sent by certified mail, return receipt requested, postage prepaid, to the following addresses (or to such other addresses as a party may designate by written notice to the other parties):
To Plaintiff:
Marcus Trujillo Senior Assistant Attorney General Antitrust Division Oregon Department of Justice 1162 Court Street NE Salem, Oregon 97301
with a copy to:
Constance Yee, Partner Ashworth & Pendleton LLP 1120 SW Third Avenue, Suite 1500 Portland, Oregon 97204
To Defendant:
Priya Nagarajan U.S. Deputy General Counsel Halcyon Semiconductor Americas Inc. 4500 Great America Parkway, Suite 300 Santa Clara, California 95054
with copies to:
Elaine Forsythe, Partner Calderwood & Harkness LLP 1301 Avenue of the Americas, 35th Floor New York, New York 10019
and
Thomas Kowalski, Partner Grantham Davis & Kowalski LLP 900 SW Fifth Avenue, Suite 2600 Portland, Oregon 97204
To the Compliance Monitor:
Kirkdale Compliance Group LLC 233 South Wacker Drive, Suite 4100 Chicago, Illinois 60606
XIX. ENTIRE AGREEMENT
90. This Consent Decree, including Exhibit A attached hereto and incorporated herein by reference, constitutes the entire agreement between the parties with respect to the subject matter hereof and sets forth all of the terms, conditions, and obligations agreed upon by the parties in resolution of the claims asserted in this action.
91. This Consent Decree supersedes all prior and contemporaneous negotiations, discussions, representations, understandings, term sheets, draft agreements, and agreements between the parties, whether oral or written, relating to the claims asserted in this action, including but not limited to the term sheet agreed upon by the parties on October 20, 2023.
92. No oral representations, promises, inducements, or modifications shall be binding upon the parties unless reduced to writing, signed by both parties, and approved by this Court in accordance with Section XIII of this Decree.
XX. GOVERNING LAW
93. This Consent Decree shall be governed by and construed in accordance with the laws of the State of Oregon, without regard to any conflict of laws principles that would result in the application of the laws of any other jurisdiction.
XXI. SEVERABILITY
94. If any provision of this Consent Decree, or the application of any provision to any person, entity, or circumstance, is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions of this Decree shall not be affected or impaired thereby. Each provision of this Consent Decree is intended to be severable and independently enforceable.
95. In the event that any provision of this Consent Decree is held to be unenforceable, the parties shall negotiate promptly and in good faith to replace the unenforceable provision with a valid and enforceable provision that most closely approximates the intent, purpose, and economic effect of the original provision, consistent with the overall purposes of this Decree and the protection of competition in the relevant market.
SIGNATURES
The parties, by their duly authorized representatives, have executed this Consent Decree as of the date first set forth below.
FOR PLAINTIFF:
STATE OF OREGON
By: ________
Name: Diane Calloway