Cardsoft (Assignment for the Benefit of Creditors), LLC v. First Data Corporation

Filing 148

SUPPLEMENTAL CLAIM CONSTRUCTION MEMORANDUM AND ORDER. Signed by Magistrate Judge Roy S. Payne on 05/29/2015. (nkl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
CARDSOFT (ASSIGNMENT FOR THE
BENEFIT OF CREDITORS), LLC
v.
FIRST DATA CORP., et al.

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CASE NO. 2:13-CV-290-RWS-RSP

SUPPLEMENTAL CLAIM CONSTRUCTION
MEMORANDUM AND ORDER
On June 10, 2014, the Court held a hearing to determine the proper construction of the
disputed claim terms in United States Patents No. 6,934,945 (“the ’945 Patent”) and 7,302,683
(“the ’683 Patent”). The Court entered a Claim Construction Memorandum and Order on
June 24, 2014 (“First Data Markman”). Dkt. No. 82.
Previously, the Court construed the term “virtual machine” (among other terms) in the
same patents-in-suit in CardSoft (Assignment for the Benefit of Creditors) LLC, et al. v.
VeriFone Systems, Inc., et al., No. 2:08-CV-98, Dkt. No. 251 (E.D. Tex. Sept. 23, 2011)
(“VeriFone Markman”). The VeriFone case proceeded to a trial on the merits and a jury verdict
of infringement. See id., Dkt. No. 389, 6/8/2012 Verdict Form. The Court entered a Judgment on
October 30, 2013. Id., Dkt. No. 483.
After the First Data Markman, the Court of Appeals for the Federal Circuit reversed the
VeriFone judgment, finding error in the construction of “virtual machine.” See CardSoft
(Assignment for the Benefit of Creditors) LLC, et al. v. VeriFone Systems, Inc., 769 F.3d 1114
(Fed. Cir. 2014) (“VeriFone Opinion”), petition for rehr’g and rehr’g en banc denied (Dec. 22,
2014), petition for cert. filed, No. 14-1160 (Mar. 23, 2015).

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After considering the arguments made by the parties in their Joint Statement of Claim
Construction (Dkt. No. 140, submitted April 20, 2015), filed pursuant to the Court’s March 17,
2015 Order Regarding Parties’ Joint Status Report (Dkt. No. 135), the Court issues this
Supplemental Claim Construction Memorandum and Order.
THE PARTIES’ POSITIONS
“virtual machine”
Plaintiff’s Proposed Construction

Defendants’ Proposed Construction

“a computer programmed to emulate a
hypothetical computer for applications relating
to transport of data that processes instructions
expressed in a hardware or operating systemindependent language”

“a computer programmed to emulate a
hypothetical computer for applications relating
to transport of data that processes instructions
expressed in a hardware and operating systemindependent language, allowing different
incompatible computers (incompatible
hardware and operating systems) to be
programmed to emulate the same hypothetical
computer so that applications written for that
hypothetical computer are therefore portable to
the previously incompatible computers. A
virtual machine, acting as an interpreter
between an application program and a payment
terminal’s underlying hardware and operating
system, has the ability to run applications that
do not depend on any specific underlying
operating system or hardware because a virtual
machine creates a complete portable
environment, which allows programs to
operate independent of processor and allows
different arrangements of hardware to be
controlled by the same application software”

Dkt. No. 140 at 2 (citations, internal quotation marks, square brackets, and ellipsis omitted from
Defendants’ proposed construction).
Plaintiff argues that Defendants “attempt[] to read limitations into the term that are
nowhere supported in [the Federal Circuit] decision, but are merely used as background in
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arriving at its decision.” Id. at 9. Plaintiff also submits that “[a]s to the question of whether the
proper construction should contain an ‘and’ or an ‘or’ in describing the hardware or operating
system-independent language, [Plaintiff] asserts that both the Federal Circuit decision and this
Court’s construction of other terms makes clear that the conjunction should be ‘or.’” Id. at 10.
Defendants respond that “Defendants’ proposed construction quotes verbatim from the
appellate opinion.” Id. at 12. Defendants urge that the required “ability to ‘write once, run
anywhere’” requires that an application “can run on not only hardware X, Y, and Z, but also on
operating system A, B, and C—it is independent of both hardware and operating system.” Id.
at 13. Defendants argue that “the Federal Circuit’s construction is explicitly part of the mandate
and may not be revisited,” and “[Plaintiff’s] litigation-driven construction would lead to the
clearly erroneous result whereby the ‘virtual machine’ would not support ‘write once, run
anywhere’ applications, which the Federal Circuit held is a ‘defining feature’ of the claimed
‘virtual machine.’” Id. at 14 & 16.
DISCUSSION
In VeriFone, the Court summarized the defendants’ arguments as follows:
. . . Defendants argue that the virtual machine’s emulation of the hypothetical
computer must somehow overcome incompatibility between both different
operating systems and different hardware (processors) that can only understand
and process its own specific native code. Defendants contend that the only way
that the claimed “virtual machine means” can overcome these incompatibilities is
if the virtual machine is programmed and receives instructions in a language that
is independent of both the hardware processor and the operating system.
VeriFone Markman at 9. In VeriFone, the Court rejected the defendants’ arguments and found:
If both the message processor and the function processor, which are part of the
virtual machine, can be implemented in the native software code of the
microprocessor, then they do not have to be expressed in “a hardware/operating
system-independent language” as Defendants’ proposed construction would
require.

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. . . [T]he specification . . . criticizes prior art virtual machines for requiring
applications written in hardware-specific code since such applications would not
be portable to different devices. . . . It does not, however, discuss whether the
virtual machine itself can be written in hardware-specific code – indeed, the cited
portion is silent on the topic of the code used to implement the claimed virtual
machine. Likewise, none of the other specification language to which Defendants
cite states that the virtual machine, or any part thereof, must necessarily be written
in a hardware/operating system independent language in order to be emulatable in
different computers.
* * * The portions of the prosecution history cited and relied upon by Defendants
. . . do not make any . . . clear disclaimer of virtual machines written in hardwarespecific code. * * * [T]he court rejects Defendants’ argument that the “virtual
machine means” must “process[] instructions in a hardware/operating systemindependent language on the communication device.”
* * * Accordingly, the court construes “virtual machine means” and “virtual
machine” to mean “a computer programmed to emulate a hypothetical computer
for applications relating to transport of data.”
Id. at 12-13 (square brackets in original).
In the above-captioned case, Defendants proposed that “virtual machine means” means “a
computer programmed to emulate a hypothetical computer running applications that are
independent of the communication device hardware and operating system.” First Data Markman
at 9. The Court found that “the specification discloses that a virtual machine can facilitate
‘portability’ of programs,” that during prosecution “Plaintiff explained that the claimed invention
is different from the well-known ‘Java Virtual Machine,’” and that “[n]owhere, however, did the
patentee definitively state that all virtual machine applications must be portable or that a virtual
machine can run only portable applications.” Id. at 12-15. “For example,” the Court noted,
“applications that can be executed on a virtual machine installed on a particular device might not
operate, or at least not operate properly, when executed on the same virtual machine on a
different device.” Id. at 15 (citing ’945 Patent at 22:21-31). The Court concluded:
Defendants’ proposal that applications must be “independent” of the device
hardware and operating system is too narrow. For example, application
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performance and capabilities may vary depending upon the hardware and
operating system. Also . . . portability or non-portability of applications is not a
limitation of the virtual machine that executes the applications. Instead, portability
of applications is merely a desired result of using a virtual machine.
Finally, as Plaintiff has argued, Defendants’ concern that Plaintiff’s proposed
constructions “would encompass even systems requiring absolute one-to-one
customization of application to platform” is addressed by the separate claim
limitation that “the virtual machine means is emulatable in different computers
having incompatible hardwares or operating systems.” More specifically, because
the parties agree that the “virtual machine means” term requires emulating a
“hypothetical computer” for running applications, the “virtual machine means”
and “emulatable . . .” limitations together require that applications run on the
same “hypothetical computer” emulated on different computers.
First Data Markman at 16 (citations and internal quotation marks omitted). The Court therefore
construed “virtual machine means” to mean “a computer programmed to emulate a hypothetical
computer for applications relating to transport of data.” Id. at 17.
After the First Data Markman, the Federal Circuit reversed the judgment in VeriFone
and found:
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.
***
The district court construed “virtual machine” as “a computer programmed to
emulate a hypothetical computer for applications relating to transport of data.”
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.” * * *
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.
...
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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
applications that did not depend on any specific underlying operating system or
hardware. * * *
***
[T]he prosecution history expressly ties th[e] extrinsic evidence—the “write once,
run anywhere” Java virtual machine—to the patent’s use of “virtual machine.”
* * * The applicant explained that the claims describe “an addition to a
conventional virtual machine,” not a wholly new structure. In short, the asserted
patents use “virtual machine” in exactly the same way Sun [Microsystems, Inc.]
used the term [with reference to its Java virtual machine]—the patents simply
optimize the virtual machine for use on a payment terminal.
...
* * * 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.
***
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.
VeriFone Opinion at 1117-20 (citations omitted).
Plaintiff argues that the VeriFone Opinion is consistent with Plaintiff’s proposal of
“instructions expressed in a hardware or operating system-independent language,” as noted
above.
Although the defendants in VeriFone, as well as the Federal Circuit, used the word “or,”
Defendants have properly countered that for instructions to be not dependent on hardware or
operating system, such instructions must be independent of both hardware and operating system.
The VeriFone Opinion is clear in this regard. See id. at 1117 (“The district court improperly

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rejected the Appellants’ argument that the ‘virtual machine’ must ‘process[ ] instructions
expressed in a hardware/operating system-independent language.’”); see also id. at 1118 (“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”); id. (“write once, run anywhere”).
Defendants’ proposed construction gives effect to the above-quoted findings in the
VeriFone Opinion but contains far more than is necessary or manageable as a construction for
the term “virtual machine.”
The Court accordingly hereby construes “virtual machine” to mean “a computer
programmed to emulate a hypothetical computer for applications relating to transport of
data that processes instructions expressed in a hardware and operating systemindependent language.”
.
CONCLUSION
The Court adopts the construction set forth in this opinion for the disputed term at issue
in the patents-in-suit.
The parties are ordered that they may not refer, directly or indirectly, to each other’s
claim construction positions in the presence of the jury. Likewise, the parties are ordered to
refrain from mentioning any portion of this opinion, other than the actual definition adopted by
the Court, in the presence of the jury. Any reference to claim construction proceedings is limited
to informing the jury of the definitions adopted by the Court.
SIGNED this 3rd day of January, 2012.
SIGNED this 29th day of May, 2015.

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ROY S. PAYNE
UNITED STATES MAGISTRATE JUDGE

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