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Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 

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United States Court of Appeals 

for the Federal Circuit ______________________ 

CARDSOFT 

(assignment for the Benefit of Creditors), LLC,

Plaintiff-Appellee

v.

VERIFONE, INC., HYPERCOM CORP., 

VERIFONE SYSTEMS INC.,

Defendants-Appellants

INGENICO S.A., INGENICO CORP., 

INGENICO INC., WAY SYSTEMS, INC.,

Defendants

______________________ 

2014-1135

______________________ 

Appeal from the United States District Court for the 

Eastern District of Texas in No. 2:08-CV-00098-RSP, 

Magistrate Judge Roy S. Payne.

______________________ 

Decided: December 2, 2015

______________________ 

DONALD R. MCPHAIL, Cozen O’Connor, Washington, 

DC, for plaintiff-appellee. Also represented by BARRY P.

GOLOB, KERRY BRENDAN MCTIGUE; WILLIAM ELLSWORTH

DAVIS III, The Davis Firm, PC, Longview, TX; KRISTINA 

CAGGIANO KELLY, PATRICK D. MCPHERSON, Duane Morris 

LLP, Washington, DC.

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2 CARDSOFT, LLC v. VERIFONE, INC. 

E. JOSHUA ROSENKRANZ, Orrick, Herrington & Sutcliffe LLP, New York, NY, for defendants-appellants. Also 

represented by RICHARD A. BIERSCHBACH, BRIAN DAVID

GINSBERG; MARK S. DAVIES, SUSANNAH WEAVER, Washington, DC; CAM THI PHAN, Menlo Park, CA; ROBERT W.

KANTNER, Jones Day, Dallas, TX. 

______________________ 

Before PROST, Chief Judge, TARANTO and HUGHES, Circuit 

Judges.

HUGHES, Circuit Judge. 

The case returns to us on remand from the Supreme 

Court. In CardSoft v. VeriFone, Inc., 769 F.3d 1114 (Fed. 

Cir. 2014), we decided an appeal by defendant-appellants 

(collectively, VeriFone) from a decision of the United 

States District Court for the Eastern District of Texas. In 

construing the patent claims, the district court adopted 

plaintiff-appellees’ (collectively, CardSoft’s) proposed 

construction for the claim term “virtual machine.” Applying the district court’s construction, a jury returned a 

verdict for CardSoft. Because the district court erred in 

its construction of “virtual machine,” and because CardSoft waived any argument that Appellants infringe under 

the correct construction, we reversed the district court’s 

decision. 

Following our first decision in this case, the Supreme 

Court held that we must review a district court’s ultimate 

interpretation of a claim term, as well as its interpretations of “evidence intrinsic to the patent,” de novo and its 

subsidiary factual findings about extrinsic evidence for 

clear error. See Teva Pharm. USA, Inc. v. Sandoz, Inc., 

135 S. Ct. 831, 841–42 (2015). The Court also vacated 

and remanded our Cardsoft decision for further consideration in light of this new standard of review. CardSoft, 

LLC v. VeriFone, Inc., 135 S. Ct. 2891 (2015). Because 

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CARDSOFT, LLC v. VERIFONE, INC. 3

this case does not involve the factual findings to which we 

owe deference under Teva, we again reverse the district 

court’s construction of the term “virtual machine.”

I 

CardSoft filed suit in March 2008 against VeriFone, 

asserting infringement of U.S. Patent Nos. 6,934,945 (the 

’945 patent) and 7,302,683 (the ’683 patent). The district 

court held a Markman hearing in July 2011 and conducted a jury trial in June 2012. The jury determined that 

certain VeriFone devices infringed claim 11 of the ’945 

patent and claim 1 of the ’683 patent and that these 

claims were not invalid. VeriFone moved for a new trial 

and for judgment as a matter of law, but the district court 

denied both motions. VeriFone appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

II

The ’683 patent is a continuation of the ’945 patent 

and shares the same specification. Both patents describe 

software for controlling a payment terminal. See ’945 

patent col. 1 ll. 10–17. Payment terminals are small, 

specialized computers, and include a processor, peripheral 

units like a card reader, a display, a printer, or a communications interface, and a software operating system to 

control the hardware components. Id. at col. 2 l. 64–col. 3 

l. 1. 

According to the patents, prior art payment terminals 

used a variety of “different hardware/software architectures.” Id. at col. 2 ll. 34–37. But this variety of different 

architectures meant that each application program for a 

payment terminal needed to be written specifically for 

that terminal. Id. at col. 3 ll. 5–11. “[P]rogramming 

alterations are not ‘portable’ between different types of 

devices.” Id. at col. 3 ll. 13–14. 

To solve this problem, the specification describes a 

“virtual machine,” acting as an “interpreter” between an 

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4 CARDSOFT, LLC v. VERIFONE, INC. 

application program (like a particular merchant’s payment processing software) and a payment terminal’s 

underlying hardware and operating system. Id. at col. 3 

ll. 29–36. Instead of writing a payment processing application for a particular hardware configuration or operating system, a developer can write the application for the 

virtual machine. Id. at col. 3 ll. 41–45. This application 

can then run on any payment terminal running the 

virtual machine, creating “a complete portable environment for program operations.” Id. at col. 3 ll. 45–46.

The specification acknowledges that the concept of a 

virtual machine was well known at the time, but argues 

that the slowdown in operation created by a conventional 

virtual machine would create a “performance penalty” 

that could be a “significant problem” for a payment terminal. Id. at col. 3 ll. 35, 47–49. To solve this problem, the 

specification describes an improved virtual machine 

optimized for use on specialized portable computers, like 

payment terminals. This improved virtual machine 

includes a specialized “virtual message processor” designed to optimize network communications. Id. at col. 3 

ll. 56–67. It also includes a specialized “virtual function 

processor” designed to optimize control of the payment 

terminal itself. Id.

Claim 1 of the ’945 patent is representative of the asserted claims:

A communication device which is arranged to process messages for communications, comprising a 

virtual machine means which includes 

a virtual function processor and function processor instructions for controlling operation of 

the device, and 

message in[str]uction means including a set of 

descriptions of message data; 

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a virtual message processor, which is arranged to be called by the function processor 

and which is arranged to carry out the message handling tasks of assembling the messages, disassembling messages and comparing 

the messages under the direction of the message instruction means that is arranged to 

provide directions for operation of the virtual 

message processor, whereby when a message 

is required to be handled by the communications device the message processor is called to 

carry out the message handling task, 

wherein the virtual machine means is emulatable in different computers having incompatible hardwares or operating systems.

Id. at col. 50 ll. 48–67 (emphases added). 

III

VeriFone appeals the district court’s construction of 

“virtual machine,” found in all asserted claims. It argues 

that the district court erred by not requiring the claimed 

“virtual machine” to include the limitation that the applications it runs are not dependent on any specific underlying operating system or hardware. We agree. Because 

the district court’s construction does not reflect the ordinary and customary meaning of “virtual machine” as 

understood by a person of ordinary skill in the art, we 

reverse. 

A 

We review the district court’s ultimate interpretation 

of patent claims de novo. Teva, 135 S. Ct. at 839, 841–42. 

“[W]hen the district court reviews only evidence intrinsic 

to the patent (the patent claims and specifications, along 

with the patent’s prosecution history), the judge’s determination will amount solely to a determination of law, 

and [we] will review that construction de novo.” Id. at 

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841. If, on the other hand, a district court resolves factual 

disputes over evidence extrinsic to the patent, we “review 

for clear error those factual findings that underlie a 

district court’s claim construction.” Id. at 842. But as we 

have repeatedly held after Teva, it is not enough that the 

district court may have heard extrinsic evidence during a 

claim construction proceeding—rather, the district court 

must have actually made a factual finding in order to 

trigger Teva’s deferential review. See, e.g., Shire Dev., 

LLC v. Watson Pharm., Inc., 787 F.3d 1359, 1364 (Fed. 

Cir. 2015) (citing Teva, 135 S. Ct. at 840–42); Teva 

Pharm. USA, Inc. v. Sandoz, 789 F.3d 1335, 1342 (Fed. 

Cir. 2015) (“Teva cannot transform legal analysis about 

the meaning or significance of the intrinsic evidence into a 

factual question simply by having an expert testify on 

it.”); see also Teva, 135 S. Ct. at 840 (“[S]ubsidiary factfinding is unlikely to loom large in the universe of litigated claim construction.”). And even then, we may 

nevertheless review the district court’s constructions de 

novo if the intrinsic record fully determines the proper 

scope of the disputed claim terms. See, e.g., Shire, 787 

F.3d at 1364 (citing Teva, 135 S. Ct. at 840–42); Microsoft 

Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1297 (Fed. Cir. 

2015) (reviewing claim construction de novo, and declining to consider “findings on [extrinsic] evidence because 

the intrinsic record [was] clear”); Eidos Display, LLC v. 

AU Optronics Corp., 779 F.3d 1360, 1365 (Fed. Cir. 2015)

(“To the extent the district court considered extrinsic 

evidence in its claim construction order or summary 

judgment order, that evidence is ultimately immaterial to 

the outcome because the intrinsic record is clear.”). In 

this case, we review the district court’s construction de 

novo, as the district court did not make any factual findings based on extrinsic evidence that underlie its constructions of the disputed claim term. 

Claim terms are generally given their ordinary and 

customary meaning as understood by a person of ordinary 

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CARDSOFT, LLC v. VERIFONE, INC. 7

skill in the art. See Phillips v. AWH Corp., 415 F.3d 1303, 

1312–13 (Fed. Cir. 2005) (en banc). The person of ordinary skill in the art is “deemed to read the claim term not 

only in the context of the particular claim in which the 

disputed term appears, but in the context of the entire 

patent,” including the specification and the prosecution 

history. Id. at 1313. It can also be appropriate to use 

extrinsic evidence to determine a term’s meaning, but 

“while extrinsic evidence can shed useful light on the 

relevant art . . . it is less significant than the intrinsic 

record in determining the legally operative meaning of 

claim language.” Id. at 1317 (citations and quotations 

omitted).

B 

The district court construed “virtual machine” as “a 

computer programmed to emulate a hypothetical computer for applications relating to transport of data.” CardSoft, Inc. v. VeriFone Holdings, Inc., No. 2:08-cv-98, 2011 

WL 4454940, at *8 (E.D. Tex. Sept. 29, 2011). That 

construction is correct, but incomplete. The district court 

improperly rejected the Appellants’ argument that the 

“virtual machine” must “process[] instructions expressed 

in a hardware/operating system-independent language.” 

Id. at *7. In doing so, the district court noted that dependent claims 5 and 6 of the ’945 patent expressly require that the “message processor” and “function 

processor” components of the virtual machine are “implemented in the native software code of the microprocessor 

in the device.” Id. The district court also noted that the 

specification does not bar the virtual machine from being 

“written in hardware specific code.” Id. Relying on this, 

the district court held that the claimed “virtual machine” 

need not run applications or instructions that are hardware or operating system independent.

The district court’s construction improperly conflates

the claimed virtual machine with applications written to 

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8 CARDSOFT, LLC v. VERIFONE, INC. 

run on the virtual machine. The claimed virtual machine

is operating system or hardware dependent because it 

must communicate directly with the underlying operating 

system or hardware. But the applications written to run 

on the virtual machine are not correspondingly dependent

because the applications are written to communicate with 

the virtual machine, not the actual underlying operating 

system or hardware. 

1 

The specification and prosecution history establish, 

and relevant precedent discussing the state of the art at 

the time of the invention confirms, that at the time the 

asserted patents were filed, the defining feature of a 

virtual machine was its ability to run applications that 

did not depend on any specific underlying operating 

system or hardware. One problem with the prior art, as 

the specification notes, was that applications were hardware or operating system dependent. ’945 patent col. 3 ll. 

5–14, 29–34. The patent teaches using a virtual machine 

to solve this problem because a virtual machine “creates a 

complete portable environment,” which “allows programs 

to operate independent of processor” and allows 

“[d]ifferent arrangements of hardware [to] be controlled 

by the same application software.” Id. at col. 3 ll. 34–46; 

col. 10 ll. 5–7. 

That the specification would emphasize this aspect of 

a virtual machine is not surprising in light of the conventional understanding of the term at the time of the invention. Sun Microsystems, Inc. (Sun) released the famed 

Java virtual machine in 1996, the year before the earliest 

possible priority date of the asserted patents. See Oracle 

Am., Inc. v. Google Inc., 750 F.3d 1339, 1348 (Fed. Cir. 

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2014).1 The Java virtual machine acted as an interpreter 

between a computer application and the computer’s 

underlying operating system and hardware, allowing 

developers to write one application and run it on multiple 

different types of computers. Oracle, 750 F.3d at 1348; 

Nazomi Commc’ns, Inc. v. Nokia Corp., 739 F.3d 1339, 

1340 (Fed. Cir. 2014); Nazomi Commc’ns, Inc. v. ARM

Holdings, PLC, 403 F.3d 1364, 1366 (Fed. Cir. 2005). Sun 

marketed Java by emphasizing that the virtual machine 

allowed a developer to “write once, run anywhere.” Oracle, 750 F.3d at 1348.

And the prosecution history expressly ties this undisputed conventional understanding of the “write once, run 

anywhere” Java virtual machine to the patent’s use of 

1 On remand from the Supreme Court, CardSoft argues that reliance on precedent describing the conventional understanding of the term “virtual machine” 

amounts to new factual findings that contradict those of 

the district court and exalt extrinsic evidence over the 

intrinsic evidence. Although we imprecisely referred to 

this as “extrinsic evidence” in our previous decision, there 

is nothing improper about relying on decisions in previous 

cases to inform an understanding of a disputed term’s 

ordinary meaning, particularly where, as is the case here, 

that understanding is entirely consistent with the intrinsic record. See Mars, Inc. v. H.J. Heinz Co., 377 F.3d 

1369, 1374 (Fed. Cir. 2004). Here, because the intrinsic 

evidence makes clear that the claimed invention relies on 

a conventional Java virtual machine, we see no reason to 

depart from that conventional understanding. Further,

the district court did not make any factual findings, and 

the mere submission of extrinsic evidence is not enough to 

mandate deference to a district court’s claim construction. 

See supra at 5–6. In short, Teva does not change the 

outcome of this case.

 

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10 CARDSOFT, LLC v. VERIFONE, INC. 

“virtual machine.” During prosecution of the ’945 patent, 

the applicant stated that the Java virtual machine was a 

“conventional” virtual machine that allowed “different 

incompatible computers (incompatible hardware and 

operating systems)” to “be programmed to emulate the 

same hypothetical computer” so that “[a]pplications” 

written for that hypothetical computer “are therefore 

portable to the previously incompatible computers.” 

JA18849. The applicant explained that the claims describe “an addition to a conventional virtual machine,” not 

a wholly new structure. Id. In short, nothing in the 

specification or prosecution history casts doubt on the 

plain and ordinary meaning of the term “virtual machine.” Cf. Phillips, 415 F.3d at 1313 (“The inquiry into 

how a person of ordinary skill in the art understands a 

claim term provides an objective baseline from which to 

begin claim interpretation.”). Here, the asserted patents 

use “virtual machine” in exactly the same way Sun used 

the term—the patents simply optimize the virtual machine for use on a payment terminal. 

2 

CardSoft makes two arguments in support of the district court’s construction. It first argues that the structure of the claims dictates a broader meaning for “virtual 

machine” because the claims state that the virtual machine “includes” certain “instructions.” ’945 patent col. 50 

ll. 49–53. CardSoft argues that these instructions are 

akin to applications, and that because the instructions are 

“include[d]” in the virtual machine, and the virtual machine can be operating system or hardware dependent, 

the instructions can also be operating system or hardware 

dependent. But this conflates the virtual machine itself 

with applications (or instructions) running on the virtual 

machine. The defining characteristic of a virtual machine 

was, and is, that it acts as an interpreter between applications and the underlying hardware or operating system. 

That the claimed virtual machine “includes” applications, 

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CARDSOFT, LLC v. VERIFONE, INC. 11

in the sense that it acts as an interpreter for applications, 

does not mean that the applications can be hardware or 

operating system dependent. Such a construction would 

leave “virtual machine” essentially meaningless.

CardSoft next argues that differentiation of independent claim 1 from dependent claims 7 and 8 of the ’945 

patent mandates a broader construction because these 

dependent claims state that instructions “do not require 

translation to the native software code of the microprocessor.” ’945 patent col. 51 ll. 29–31, 36–37. But claim 

differentiation is merely a presumption. It is “a rule of 

thumb that does not trump the clear import of the specification.” Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 

1323 (Fed. Cir. 2011); see also Marine Polymer Techs., Inc. 

v. HemCon, Inc., 672 F.3d 1350, 1359 (Fed. Cir. 2012) (en 

banc) (“[C]laim differentiation is not a hard and fast rule 

and will be overcome by a contrary construction dictated 

by the written description or prosecution history.”) (citation and quotation omitted). Because the ordinary meaning of “virtual machine” is clear in light of the 

specification and prosecution history, claim differentiation 

does not change its meaning. 

IV 

VeriFone contends that, applying the correct construction, it is entitled to judgment of no infringement as 

a matter of law because the accused payment terminals 

run applications that depend on a specific underlying 

operating system or hardware. Appellants’ Br. 64–65. 

CardSoft did not respond to this argument in its responsive brief on appeal. CardSoft recognized the issue: 

“Appellants argue that, under their construction of ‘virtual machine,’ ‘a ruling of noninfringement [sic] is compelled.’” Appellee’s Br. 29. But CardSoft never 

responded. It instead argued that “[b]ecause Appellants’ 

construction of ‘virtual machine’ is wrong” the jury’s 

verdict should be affirmed. Id.

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12 CARDSOFT, LLC v. VERIFONE, INC. 

Arguments that are not appropriately developed in a 

party’s briefing may be deemed waived. See SmithKline 

Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. 

Cir. 2006) (collecting cases); see also Procter & Gamble Co. 

v. Amway Corp., 376 F.3d 496, 499 n.1 (5th Cir. 2004) 

(“Failure adequately to brief an issue on appeal constitutes waiver of that argument.”). By failing to respond to 

VeriFone’s argument in the briefing, CardSoft has effectively conceded that the accused devices run applications 

that depend on a specific underlying operating system or 

hardware. Consequently, we find that CardSoft has 

waived this argument, and we grant Appellants judgment 

of no infringement as a matter of law.

V 

Because the district court erred by failing to give “virtual machine” its ordinary and customary meaning, we 

reverse the district court’s construction of this term. And 

because CardSoft waived any argument that Appellants 

infringe under the correct construction, we grant Appellants judgment of no infringement as a matter of law. 

REVERSED

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