United States: CardSoft: A Primer On Basic Claim Construction Principles

The U.S. Court of Appeals for the Federal Circuit recently reaffirmed basic claim construction principles in CardSoft, LLC v. VeriFone, Inc., No. 2014-1135 (Fed. Cir. Oct. 17, 2014).  The court applied a broad range of tools from the seminal Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), to arrive at its interpretation, reversing the trial court.

The asserted patents (including U.S. Patent No. 6,934,945 ("the '945 patent")) describe software for controlling a payment terminal.  The problem in the prior art was the variation in payment terminals, which used different hardware/software architectures.  The variety of architectures required that each application program for a payment terminal be written expressly for the given terminal, meaning "[p]rogramming alterations are not 'portable' between different types of devices."  CardSoft, No. 2014-1135, slip op. at 3 (quoting '945 patent, col. 3 II. 13-14).  The patents-in-suit taught an improved "virtual machine" acting as an "interpreter" between an application program (like a merchant's payment-processing software) and the terminal's hardware systems.  Id.  "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," making it portable across systems.  Id. (citing '945 patent, col. 3 ll. 41-45).  The improved "virtual machine" of the patents-in-suit included a specialized "virtual message processor" designed to optimize network communications, and a "virtual function processor" designed to optimize control of the payment terminal itself.  Id. at 4.

CardSoft sued VeriFone and others for patent infringement in March 2008.  Id. at 2.  Having held a Markman hearing, the district court construed "virtual machine"—a term found in all the asserted claims—as "a computer programmed to emulate a hypothetical computer for applications relating to transport of data." Id. at 6 (quoting CardSoft, Inc. v. VeriFone Holdings, Inc., No. 2:08-cv-98, 2011 WL 4454940, at *8 (E.D. Tex. Sept. 29, 2011)).  The trial court thus found that the claimed "virtual machine" need not run applications or instructions that are hardware or operating system independent. 

Subsequent to trial in June 2012, the jury determined under the court's construction that VeriFone infringed two valid claims of the patents-in-suit.  VeriFone appealed the district court's construction of "virtual machine," arguing before the Federal Circuit that the trial 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."  Id. at 5.  

The Federal Circuit panel, in an opinion authored by Circuit Judge Hughes, noted that the district court's claim construction was "correct, but incomplete."  Id. at 6.  "The district court improperly rejected the Appellants' argument that the 'virtual machine' must 'process[] instructions expressed in a hardware/operating system-independent language."  Id. (alteration in original) (quoting CardSoft, 2011 WL 4454940, at *7). 

The court came to this conclusion by first noting that the problem in the prior art, as described by the specification, was that applications were hardware or operating system dependent.  Id. at 7.  The court found a "virtual machine" was taught to solve this problem that "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. (alterations in original) (quoting '945 patent, col. 3 ll. 34-46; col. 10 ll. 5-7).

Recognizing that it can also be appropriate to use extrinsic evidence to determine a term's meaning, the court found that Sun Microsystems, Inc. released the Java "virtual machine" in 1996—well before the priority date of the patents-in-suit—and advertised it as allowing a developer to "write once, run anywhere."  Id. (quoting Oracle Am., Inc. v. Google Inc., 750 F.3d 1339, 1348 (Fed. Cir. 2014)).  During prosecution, the applicant explained that the asserted patents use the term "virtual machine" in the same way Sun did—the patents here further optimize the virtual machine for use on a payment terminal.  Id. at 8.

The Federal Circuit rejected CardSoft's arguments supporting the trial court's construction.  First, CardSoft argued that the structure of the claims dictates a broader meaning because they "include" certain "instructions" in the virtual machine, suggesting they can also be operating system or hardware dependent.  Id.   But, according to the court,

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, 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.


Second, CardSoft argued that the principle of claim differentiation supports the broader construction, since dependent claims 7 and 8 state that instructions "do not require translation to the native software code of the microprocessor."  Id. at 8-9 (citing '945 patent, col. 51 ll. 29-31, 36-37).  But the court reminded that claim differentiation is merely "a rule of thumb that does not trump the clear import of the specification."  Id. (quoting Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1323 (Fed. Cir. 2011); Marine Polymer Techs., Inc. v. HemCon, Inc., 672 F.3d 1350, 1359 (Fed. Cir. 2012)
(en banc)).  In this case, held the court, "[b]ecause the ordinary meaning of 'virtual machine' is clear in light of the specification and prosecution history, claim differentiation does not change its meaning."  Id. at 9.

Under this new construction, VeriFone contended in its Federal Circuit briefing that it was entitled to summary judgment of noninfringement, because the accused payment terminals run applications that depend on a specific underlying operating system or hardware.  See id.  The court granted summary judgment of noninfringement as a matter of law, finding that CardSoft failed to respond to the noninfringement argument.  Id. at 10 ("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.").

Practitioners should notice the heavy reliance by the court on the specification in its claim construction.  It did not stray from the express purpose of the invention and other disclosure teachings, relying on the context of the entire patent, not just the claim itself.  Phillips, 415 F.3d at 1312-13.  In addition to the intrinsic evidence, including the prosecution history, less significant but very telling extrinsic evidence was cited to arrive at the ordinary and customary meaning of the disputed claim term as understood by a person of ordinary skill in the art.  Id. at 1317.

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