In this POS patent infringement lawsuit, CardSoft sued VeriFone and others asserting infringement of its software patents. Both companies are in the point of sale (POS) industry that consumers recognize as credit card readers, and also the industry that Apple is seeking to gain market share in with its new concept of Apple Pay.
At the initial trial, a jury returned a verdict for CardSoft based on the district court’s interpretation of the term “virtual machine”, which was language included in CardSoft’s patents. The Court of Appeals for the Federal Circuit reversed this decision, however, stating that the district court erred in interpreting “virtual machine” and also because CardSoft did not argue on appeal that Verifone was actually infringing under the appropriate interpretation, and therefore waived any argument that there was actual infringement.
So what is a “virtual machine”? Before CardSoft developed this software, different companies had different POS machines with varying hardware and software configurations. The virtual machine software allowed developers to write applications for the virtual machine itself, rather than the many different hardware/software configurations and the virtual machine could then be applied to these different POS systems. This was marketed by another by another company (Sun) as allowing developers to “write once, run anywhere.”
Although there were other virtual machines on the market when CardSoft developed its software, it claimed to have improved the technology. Specifically, it claimed to have optimized its virtual machine software for use on a payment terminal. Verifone contended on appeal, however, that it was not infringing because its payment terminals run applications that depend on a specific underlying operating system or hardware, unlike the virtual machine that CardSoft had developed which could be applied to any payment terminal.
CardSoft seemed to have blundered by not addressing VeriFone’s contention, and only stated that VeriFone’s interpretation was wrong. The Court of Appeals noted that “arguments that are not appropriately developed in a party’s briefing may be deemed waived,” and then held that by failing to respond, CardSoft effectively conceded that VeriFone’s devices were not infringing.
Whether CardSoft could have successfully argued that VeriFone’s devices were infringing is not clear. But it seems that even if they had made the argument, it would not likely have been successful based on the proper interpretation of “virtual machine” as the Verifone devices actually depended on a specific underlying operating system or hardware.
It will be interesting to see how the new Apple Pay system plays out into this world of virtual machines and POS systems, and if and what type of patents Apple has filed for or received.