Court Opinion

ID: 2743395
Source: CourtListenerOpinion
Date Created: 2014-10-17 16:01:04.863625+00
Date Added: 2024-06-11T10:05:33.902729
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

                   CARDSOFT
  (assignment for the Benefit of Creditors), LLC,
                 Plaintiff-Appellee,

                           v.

       VERIFONE, INC., HYPERCOM CORP.,
         and VERIFONE SYSTEMS INC.,
              Defendants-Appellants,

                         AND

       INGENICO S.A., INGENICO CORP.,
    INGENICO INC., AND 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, Magis-
trate Judge Roy S. Payne.
                 ______________________

               Decided: October 17, 2014
                ______________________

   DONALD R. MCPHAIL, Cozen O’Connor, of Washington,
DC, argued for plaintiff-appellee. With him on the brief
were BARRY P. GOLOB and KERRY B. MCTIGUE. Of counsel
2                           CARDSOFT, LLC   v. VERIFONE, INC.

on the brief was WILLIAM E. DAVIS, III, Davis Firm P.C., of
Longview, Texas.

     E. JOSHUA ROSENKRANZ, Orrick, Herrington & Sut-
cliffe LLP, of New York, New York, argued for defend-
ants-appellants. With him on the brief were MARK S.
DAVIES, RICHARD A. BIERSCHBACH, BRIAN D. GINSBERG,
and CAM T. PHAN. Of counsel on the brief was ROBERT W.
KANTNER, Jones Day, of Dallas, Texas.
                 ______________________

Before PROST, Chief Judge, TARANTO and HUGHES, Circuit
                        Judges.
HUGHES, Circuit Judge.
    CardSoft alleges that Appellants infringe two patents
directed to software for small, specialized computers, like
payment terminals. In construing the patent claims, the
district court adopted CardSoft’s proposed construction for
the claim term “virtual machine.” Applying the district
court’s construction, a jury returned a verdict for Card-
Soft. 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 reverse.
                             I
    CardSoft (Assignment for the Benefit of Creditors),
LLC (CardSoft) filed suit in March 2008 against Appel-
lants VeriFone, Inc., VeriFone Systems Inc., and Hyper-
com Corp. (collectively, 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
CARDSOFT, LLC   v. VERIFONE, INC.                           3

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 commu-
nications 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 architec-
tures.” 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
application program (like a particular merchant’s pay-
ment 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 appli-
cation for a particular hardware configuration or operat-
ing 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 environ-
ment 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
4                            CARDSOFT, LLC   v. VERIFONE, INC.

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 termi-
nal. 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” de-
signed 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 as-
serted claims:
    A communication device which is arranged to pro-
    cess messages for communications, comprising a
    virtual machine means which includes
       a virtual function processor and function pro-
       cessor instructions for controlling operation of
       the device, and
       message in[str]uction means including a set of
       descriptions of message data;
       a virtual message processor, which is ar-
       ranged to be called by the function processor
       and which is arranged to carry out the mes-
       sage handling tasks of assembling the mes-
       sages, disassembling messages and comparing
       the messages under the direction of the mes-
       sage 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 communica-
       tions device the message processor is called to
       carry out the message handling task,
CARDSOFT, LLC   v. VERIFONE, INC.                             5

        wherein the virtual machine means is emu-
        latable in different computers having incom-
        patible 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 appli-
cations it runs are not dependent on any specific underly-
ing operating system or hardware. We agree. Because
the district court’s construction does not reflect the ordi-
nary and customary meaning of “virtual machine” as
understood by a person of ordinary skill in the art, we
reverse.
                               A
    “Claim construction is a legal statement of the scope
of the patent right” that we review de novo. Lighting
Ballast Control LLC v. Philips Elecs. N. Am. Corp., 744
F.3d 1272, 1276–77, 1284 (Fed. Cir. 2014) (en banc);
Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1456 (Fed.
Cir. 1998) (en banc). Claim terms are generally given
their ordinary and customary meaning as understood by a
person of ordinary skill in the art. 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 appropri-
ate to use extrinsic evidence to determine a term’s mean-
ing, 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
6                           CARDSOFT, LLC   v. VERIFONE, INC.

claim language.”   Id. at 1317 (citations and quotations
omitted).
                            B
    The district court construed “virtual machine” as “a
computer programmed to emulate a hypothetical comput-
er for applications relating to transport of data.” Card-
Soft, 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 de-
pendent claims 5 and 6 of the ’945 patent expressly re-
quire that the “message processor” and “function
processor” components of the virtual machine are “imple-
mented in the native software code of the microprocessor
in the device.” Id. at *7. 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 instruc-
tions that are hardware or operating system independent.
    The district court’s construction improperly conflates
the claimed virtual machine with applications written to
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.
CARDSOFT, LLC   v. VERIFONE, INC.                          7

                               1
     The intrinsic and extrinsic evidence establishes that,
at the time the asserted patents were filed, the defining
feature of a virtual machine was its ability to run applica-
tions 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, 29–36. 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 proces-
sor” 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 extrinsic
evidence. 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. 2014). The Java virtual machine acted as an inter-
preter 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.” Ora-
cle, 750 F.3d at 1348.
     And the prosecution history expressly ties this extrin-
sic evidence—the “write once, run anywhere” Java virtual
machine—to the patent’s use of “virtual machine.” Dur-
ing prosecution of the ’945 patent, the applicant stated
8                            CARDSOFT, LLC   v. VERIFONE, INC.

that the Java virtual machine was a “conventional” virtu-
al machine that allowed “different incompatible comput-
ers (incompatible hardware and operating systems)” to
“be programmed to emulate the same hypothetical com-
puter” so that “[a]pplications” written for that hypothet-
ical computer “are therefore portable to the previously
incompatible computers.” JA18849. The applicant ex-
plained that the claims describe “an addition to a conven-
tional virtual machine,” not a wholly new structure. Id.
In short, 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 dis-
trict court’s construction. It first argues that the struc-
ture of the claims dictates a broader meaning for “virtual
machine” because the claims state that the virtual ma-
chine “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 ma-
chine 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 appli-
cations and the underlying hardware or operating system.
That the claimed virtual machine “includes” applications,
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 independ-
ent claim 1 from dependent claims 7 and 8 of the ’945
CARDSOFT, LLC   v. VERIFONE, INC.                         9

patent mandates a broader construction because these
dependent claims state that instructions “do not require
translation to the native software code of the microproces-
sor.” ’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 specifi-
cation.” 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.”) (cita-
tion and quotation omitted). Because the ordinary mean-
ing 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 con-
struction, 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 respon-
sive brief on appeal. CardSoft recognized the issue:
“Appellants argue that, under their construction of ‘virtu-
al machine,’ ‘a ruling of noninfringement [sic] is com-
pelled.’”    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.
    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 consti-
10                           CARDSOFT, LLC   v. VERIFONE, INC.

tutes waiver of that argument.”). By failing to respond to
VeriFone’s argument in the briefing, CardSoft has effec-
tively 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 “vir-
tual 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 Appel-
lants judgment of no infringement as a matter of law.
                       REVERSED