Court Opinion

ID: 3159284
Source: CourtListenerOpinion
Date Created: 2015-12-02 16:01:18.994767+00
Date Added: 2024-06-11T12:00:14.292463
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.,
           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.
2                            CARDSOFT, LLC   v. VERIFONE, INC.

     E. JOSHUA ROSENKRANZ, Orrick, Herrington & Sut-
cliffe LLP, New York, NY, for defendants-appellants. Also
represented by RICHARD A. BIERSCHBACH, BRIAN DAVID
GINSBERG; MARK S. DAVIES, SUSANNAH WEAVER, Washing-
ton, 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.” Apply-
ing 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 Card-
Soft 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 interpreta-
tions 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 considera-
tion in light of this new standard of review. CardSoft,
LLC v. VeriFone, Inc., 135 S. Ct. 2891 (2015). Because
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 conduct-
ed 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 juris-
diction 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
4                            CARDSOFT, LLC   v. VERIFONE, INC.

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
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;
CARDSOFT, LLC   v. VERIFONE, INC.                         5

        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,
        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
    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 deter-
mination will amount solely to a determination of law,
and [we] will review that construction de novo.” Id. at
6                            CARDSOFT, LLC   v. VERIFONE, INC.

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 fact-
finding is unlikely to loom large in the universe of litigat-
ed 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 declin-
ing 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 find-
ings based on extrinsic evidence that underlie its con-
structions of the disputed claim term.
    Claim terms are generally given their ordinary and
customary meaning as understood by a person of ordinary
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 ordi-
nary 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 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. 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 hard-
ware or operating system independent.
    The district court’s construction improperly conflates
the claimed virtual machine with applications written to
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 hard-
ware 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 conven-
tional understanding of the term at the time of the inven-
tion. 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.
CARDSOFT, LLC   v. VERIFONE, INC.                         9

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.” Ora-
cle, 750 F.3d at 1348.
   And the prosecution history expressly ties this undis-
puted 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 ar-
gues that reliance on precedent describing the conven-
tional 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 intrin-
sic 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.
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 de-
scribe “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 ma-
chine.” 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 ma-
chine 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,
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 independ-
ent 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 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.
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 consti-
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