Plaintiff Waives Infringement Under Proper Claim Construction

The Federal Circuit recently issued a decision in CardSoft v. Verifone, which the Court overturned the district court’s claim construction. Overturning a district court’s claim construction is hardly unusual, and perhaps more typical than it really should be, but that is another story for another day. What was unique about this particular case was that the Federal Circuit also went on to rule that CardSoft had waived any argument that the defendants had infringed under what they determined to ultimately be the correct claim construction.

CardSoft filed this patent infringement suit in March 2008 against VeriFone, Inc., VeriFone Systems Inc., and Hypercom Corp. (collectively, “Defendants”), 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 of the Defendants’ devices infringed claim 11 of the ’945 patent and claim 1 of the ’683 patent and that these claims were not invalid. The Defendants moved for a new trial and for judgment as a matter of law, but the district court denied both motions.

Claim 1 of the ’945 patent was deemed representative of the asserted claims by CardSoft:

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;

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.

(emphasis added).

The critical term in the claim was “virtual machine,” which the district court construed to mean “a computer programmed to emulate a hypothetical computer for applications relating to transport of data.” The Federal Circuit, with Judge Hughes writing and being joined by Chief Judge Prost and Judge Taranto, explained that this construction by the district court was correct insofar as it went, but that the definition was not complete. The Federal Circuit explained that the district court improperly rejected the Defendants’ argument that the “virtual machine” must “process instructions expressed in a hardware/operating system-independent language.” This incomplete construction lead the district court to incorrectly rule (in the opinion of the Federal Circuit) that the claimed “virtual machine” need not run applications or instructions that are hardware or operating system independent. The Federal Circuit explained that such a claim construction improperly conflated the claimed virtual machine with applications written to run on the virtual machine. Not surprisingly, the Defendants argued that, under the proper claim construction, there could be no infringement.

The Federal Circuit pointed out that in its brief CardSoft recognized the gravity of the Defendants’ arguments, saying: “Appellants argue that, under their construction of ‘virtual machine,’ ‘a ruling of noninfringement [sic] is compelled.’” Instead of arguing an alternative theory of infringement under the claim interpretation offered by the defendants, CardSoft merely argued that the district court’s construction was accurate and the jury verdict should stand.

The Federal Circuit explained that arguments not developed in a party’s briefing may be deemed waived. By failing to respond to the Defendants’ argument, the Federal Circuit said that CardSoft had effectively conceded that the accused devices run applications that depend on a specific underlying operating system or hardware. As a result, the Federal Circuit found that CardSoft had waived argument under the proper claim construction, and thus the court granted the Defendants judgment of no infringement as a matter of law.