Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-14-01542/USCOURTS-ca13-14-01542-0/pdf.json

Parties Involved:
Michelle K. Lee
Intervenor
Microsoft Corporation
Appellant
Proxyconn, Inc.
Cross-Appellant

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

MICROSOFT CORPORATION,

Appellant

v.

PROXYCONN, INC.,

Cross-Appellant

v.

MICHELLE K. LEE, DIRECTOR, U.S. PATENT AND 

TRADEMARK OFFICE,

Intervenor

______________________ 

2014-1542, -1543

______________________ 

Appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. 

IPR2012-00026, IPR2013-00109.

______________________ 

Decided: June 16, 2015

______________________ 

JOHN D. VANDENBERG, Klarquist Sparkman, LLP, 

Portland, OR, argued for appellant. Also represented by 

STEPHEN J. JONCUS, CARLA TODENHAGEN. 

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2 MICROSOFT CORPORATION v. PROXYCONN, INC. 

BRYAN K. WHEELOCK, Harness, Dickey & Pierce, PLC, 

St. Louis, MO, argued for cross-appellant. Also represented by MATTHEW L. CUTLER. 

NATHAN K. KELLY, United States Patent and Trademark Office, Office of the Solicitor, Alexandria, VA, for 

intervenor. Also represented by ROBERT J. MCMANUS, 

SCOTT WEIDENFELLER. 

______________________ 

Before PROST, Chief Judge, LOURIE, Circuit Judge, and 

GILSTRAP, District Judge.

∗

PROST, Chief Judge.

This appeal arises from the inter partes review 

(“IPR”) of U.S. Patent No. 6,757,717 (“’717 patent”) owned 

by Proxyconn, Inc. (“Proxyconn”). The United States 

Patent and Trademark Office, Patent Trial and Appeal 

Board (“Board”) concluded that all of the challenged 

claims except claim 24 were unpatentable as anticipated 

under 35 U.S.C. § 102 alone or additionally as obvious 

under 35 U.S.C. § 103. See Microsoft Corp. v. Proxyconn, 

Inc., IPR2012-00026 and IPR2013-00109, Paper No. 73 

(PTAB Feb. 19, 2014) (“Board Decision”). Microsoft 

Corporation (“Microsoft”) appeals the Board’s determination that claim 24 is patentable. Proxyconn cross-appeals, 

challenging the Board’s use of the broadest reasonable 

interpretation standard of claim construction during 

IPRs, its unpatentability determinations, and its denial of 

Proxyconn’s motion to amend. Then–Deputy Director, 

now Director, of the United States Patent and Trademark 

∗ Honorable Rodney Gilstrap, District Judge, United States District Court for the Eastern District of Texas, 

sitting by designation.

 

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Office (“Director”) intervened for the limited purpose of 

addressing the Board’s use of the broadest reasonable 

interpretation standard and its denial of Proxyconn’s 

motion to amend. For the reasons stated below, we 

affirm-in-part, reverse-in-part, and vacate-in-part and 

remand for proceedings consistent with this opinion. 

BACKGROUND

The ’717 patent relates to a system for increasing the 

speed of data access in a packet-switched network. ’717 

patent col. 1 ll. 12–15. The invention makes use of “digital digests” that act as short digital fingerprints for the 

content of their corresponding documents. Id. at col. 2 ll. 

9–13. By communicating the smaller digital digests in 

place of the documents themselves, the invention reduces 

the redundant transmission of data throughout the network. Id. at col. 2 ll. 17–25. 

The ’717 patent discloses several embodiments. The 

most basic embodiment is depicted in Figure 4, shown 

below. 

In this embodiment, the receiver/computer (46) sends a

request for data to the sender/computer (42). The sender/computer calculates a digital digest on the data stored 

in its memory and transmits the digest to the receiver/computer. The receiver/computer then searches its

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own memory for data with the same digest. If it finds 

such data, it uses that data as if it were received from the 

sender/computer and issues a positive indication signal to 

the sender/computer, completing the transaction. If the 

receiver/computer does not find such data, it sends a 

negative indication to the sender/computer, prompting the 

sender/computer to transmit the actual data to the receiver/computer. Id. at col. 7 ll. 18–36, 51–67.

In another embodiment, depicted in Figure 11 shown 

below, the network additionally interposes intermediaries, such as a gateway computer and a caching computer, 

between the sender/computer and receiver/computer. 

In this embodiment, the gateway (60) intercepts a digital 

digest sent from the sender/computer (42) to the receiver/computer (46), saves it in its memory, and passes it 

unchanged to the receiver/computer. If the gateway then 

intercepts a negative signal from the receiver/computer, 

the caching computer (62) searches for data with the same 

digital digest in its network cache memory. If that digest 

is found, the gateway sends the data to the receiver/computer, changes the indication signal to positive, and 

then passes the indication signal on to the sender/computer. Id. at col. 8 l. 57–col. 9 l. 24.

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The ’717 patent concludes with 34 claims directed to 

systems and methods for increasing data access in a 

packet-switched network.

Microsoft filed two separate IPR petitions on the ’717 

patent, each challenging different claims. The Board 

joined the two proceedings and granted review of certain 

of Microsoft’s challenges to the patentability of claims 1, 

3, 6, 7, 9–12, 14, and 22–24. During the proceedings, 

Proxyconn filed a motion to amend, seeking to substitute

(among others) new claims 35 and 36 for claims 1 and 3, 

respectively. In its final written decision, the Board 

determined that claims 1, 3, 6, 7, 9–12, 14, 22, and 23 

were unpatentable under § 102, that claims 1, 3, and 10 

were additionally unpatentable under § 103, but that

claim 24 had not been shown to be unpatentable. The 

Board also denied Proxyconn’s motion to amend, concluding, inter alia, that Proxyconn did not meet its burden of 

establishing that it was entitled to the amended claims, 

and rejecting Proxyconn’s argument that it did not need 

to establish patentability over a reference that was not 

part of the original bases of unpatentability for which 

review of claims 1 and 3 was instituted. 

Both parties appealed from the Board’s decision, and 

the Director intervened. We have jurisdiction under 28 

U.S.C. § 1295(a)(4)(A). 

DISCUSSION

As a general matter, we review the Board’s conclusions of law de novo and its findings of fact for substantial 

evidence. See In re Gartside, 203 F.3d 1305, 1316 (Fed. 

Cir. 2000). In Teva Pharmaceuticals U.S.A., Inc. v. 

Sandoz, Inc., 135 S. Ct. 831 (2015), the Supreme Court 

clarified the standards of review for claim construction. 

Pursuant to Teva’s framework and our review of Board 

determinations, we review the Board’s ultimate claim 

constructions de novo and its underlying factual determiCase: 14-1542 Document: 53-2 Page: 5 Filed: 06/16/2015
6 MICROSOFT CORPORATION v. PROXYCONN, INC. 

nations involving extrinsic evidence for substantial evidence. See Teva, 135 S. Ct. at 841–42.

In this case, because the intrinsic record fully determines the proper construction, we review the Board’s 

claim constructions de novo. Teva, 135 S. Ct. at 840–42. 

To the extent the Board considered extrinsic evidence 

when construing the claims, we need not consider the 

Board’s findings on that evidence because the intrinsic 

record is clear. See Phillips v. AWH Corp., 415 F.3d 1303, 

1318 (Fed. Cir. 2005) (en banc). 

I 

Proxyconn’s threshold challenge to the Board’s actions

is that the broadest reasonable interpretation standard of 

claim construction should not apply during IPRs. Proxyconn argues that the U.S. Patent and Trademark Office 

(“PTO”) exceeded its authority in promulgating 37 C.F.R. 

§ 42.100(b), and that the broadest reasonable interpretation is inappropriate during IPRs in light of the patentee’s 

limited ability to amend its claims.

Proxyconn’s argument is foreclosed by our decision in 

In re Cuozzo Speed Techs., LLC, 778 F.3d 1271 (Fed. Cir. 

2015), rendered after the briefing in this case began. In 

Cuozzo, this court held that the broadest reasonable 

interpretation standard in IPRs “was properly adopted by 

PTO regulation.” Id. at 1282. Because we are bound by 

the decision in Cuozzo, we must therefore reject Proxyconn’s argument that the Board legally erred in using the

broadest reasonable interpretation standard during IPRs. 

That is not to say, however, that the Board may construe claims during IPR so broadly that its constructions 

are unreasonable under general claim construction principles. As we have explained in other contexts, “[t]he 

protocol of giving claims their broadest reasonable interpretation . . . does not include giving claims a legally 

incorrect interpretation.” In re Skvorecz, 580 F.3d 1262, 

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1267 (Fed. Cir. 2009); see also In re Suitco Surface, Inc., 

603 F.3d 1255, 1260 (Fed. Cir. 2010) (“The broadestconstruction rubric coupled with the term ‘comprising’ 

does not give the PTO an unfettered license to interpret 

claims to embrace anything remotely related to the 

claimed invention.”). Rather, “claims should always be 

read in light of the specification and teachings in the 

underlying patent.” Suitco, 603 F.3d at 1260. The PTO 

should also consult the patent’s prosecution history in 

proceedings in which the patent has been brought back to 

the agency for a second review. See Tempo Lighting Inc. 

v. Tivoli LLC, 742 F.3d 973, 977 (Fed. Cir. 2014). Even 

under the broadest reasonable interpretation, the Board’s 

construction “cannot be divorced from the specification 

and the record evidence,” In re NTP, Inc., 654 F.3d 1279, 

1288 (Fed. Cir. 2011), and “must be consistent with the 

one that those skilled in the art would reach,” In re Cortright, 165 F.3d 1353, 1358 (Fed. Cir. 1999). A construction that is “unreasonably broad” and which does not 

“reasonably reflect the plain language and disclosure” will 

not pass muster. Suitco, 603 F.3d at 1260. 

With these principles in mind, we now turn to the 

three claim constructions challenged by the parties in this 

appeal.

II

A 

Proxyconn challenges the Board’s construction of the 

phrase “gateway . . . connected to said packet-switched 

network in such a way that network packets sent between 

at least two other computers” recited in claim 6, and 

incorporated into dependent claims 7 and 9. Representative claim 6 reads:

6. A system for data access in a packet-switched 

network, comprising:

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a gateway including an operating unit, a memory 

and a processor connected to said packet-switched 

network in such a way that network packets sent 

between at least two other computers pass through 

it; 

a caching computer connected to said gateway 

through a fast local network, wherein said caching 

computer includes an operating unit, a first 

memory, a permanent storage memory and a processor; 

said caching computer further including a network cache memory in its permanent storage 

memory, means for a digital digest and means for 

comparison between a digital digest on data in its 

network cache memory and a digital digest received from said packet-switched network through 

said gateway.

’717 patent col. 10 l. 64–col. 11 l. 12 (emphases added).

Before the Board, Proxyconn contended that the term 

“two other computers” referred only to the sender/computer and the receiver/computer. Microsoft contended that there was no limitation on the phrase “two 

other computers,” and that those two other computers 

could be any two computers connected on the network to 

the gateway, including the caching computer. The Board 

agreed with Microsoft, concluding that the “two other

computers” were not limited just to the sender/computer 

and the receiver/computer. The Board then concluded

that claims 6, 7, and 9 were anticipated by the “DRP” 

reference. 

The Board erred in concluding that the “two other 

computers” could include the caching computer. Beginning with the language of the claims, claim 6 recites a 

system comprising a gateway, a caching computer, and 

“two other computers.” ’717 patent col. 10 l. 54–col. 11 l. 

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12. Not only are the “two other computers” recited independently from, and in addition to, the gateway and 

caching computers, the word “other” denotes a further 

level of distinction between those two computers and the 

specific gateway and caching computers recited separately 

in the claim. 

The specification confirms that the phrase “two other 

computers” is limited to the sender/receiver and computer/receiver. Other than in claim 6 itself, the phrase “two 

other computers” is used three times in the specification, 

each time as part of the embodiment containing the 

gateway and caching computer intermediaries. Id. at col. 

2 ll. 43–57, col. 3 ll. 12–26, col. 8 l. 57–col. 9 l. 9. And in 

each instance where it is used, the phrase “two other 

computers” describes components that are separate and 

distinct from the gateway and the caching computer. Id. 

For example, the specification states: “Gateway 60 is 

connected to a wide-area packet-switched network in such 

a way that network packets sent between at least two 

other computers 42 and 46 pass through the gateway 60. 

The caching computer 62 uses a part of its permanent 

storage memory for network cache memory 66.” Id. at col. 

8 l. 64–col. 9 l. 1 (emphases added). As shown in referenced Figure 11, the “two other computers 42 and 46” in 

this passage are the sender/computer and receiver/computer, respectively. Read together with labeled 

Figure 11, this portion of the specification makes clear 

that the gateway, the caching computer, and the “two 

other computers” are each separate and distinct components of the overall system. The Board’s construction, 

which expands the “two other computers 42 and 46” to 

include the separately identified caching computer, is 

unreasonably broad in light of the language of the claims 

and specification. 

Because the Board’s determination that claims 6, 7, 

and 9 were unpatentable was based on an unreasonably 

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broad construction of the term “gateway . . . between at 

least two other computers,” we vacate the Board’s findings of unpatentability of claims 6, 7, and 9 and remand 

for proceedings consistent with this opinion. 

B 

Along similar lines, Proxyconn also challenges the 

Board’s construction of the terms “sender/computer” and 

“receiver/computer” in independent claims 1, 10, and 22, 

and incorporated into dependent claims 3 and 23. Representative claim 1 reads:

1. A system for data access in a packet-switched 

network, comprising:

a sender/computer including an operating unit, a 

first memory, a permanent storage memory and a 

processor and a remote receiver/computer including an operating unit, a first memory, a permanent storage memory and a processor, said 

sender/computer and said receiver/computer

communicating through said network;

said sender/computer further including means for 

creating digital digests on data;

said receiver/computer further including a network cache memory and means for creating digital digests on data in said network cache memory; 

and 

said receiver/computer including means for comparison between digital digests.

’717 patent col. 10 ll. 31–45 (emphases added).

The Board construed “sender/computer” to mean a 

computer that sends data and “receiver/computer” to 

mean a computer that receives data, and further determined that both terms were broad enough to encompass 

intermediaries. The Board then concluded that claims 1, 

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3, 10, 22, and 23 were anticipated by the “Santos” reference and that claims 1, 3, and 10 were additionally rendered obvious by the “Yohe” and “Perlman” references. 

Proxyconn argues on appeal, as it did before the Board, 

that the terms “sender/computer” and “receiver/computer” 

should be limited to just those two computers; they should 

not be construed as encompassing the separate intermediary gateway and caching computers. Microsoft disagrees, arguing that the ’717 patent does not limit either 

term to a single machine or a single function. 

The Board erred in concluding that the terms “sender/computer” and “receiver/computer” were broad enough 

to include the intermediary gateway and caching computers for similar reasons as explained above. The language 

of the specification consistently refers to the sender/computer, receiver/computer, gateway, and caching 

computers as separate and independent components of an 

overall system. The figures of the ’717 patent separately 

identify and number each component of the system. And 

nowhere does the ’717 patent indicate that the gateway 

and caching computer are the same as, or can be subsumed within, the sender/computer and receiver/computer. 

It is true, as Microsoft and the Board point out, that 

Figure 4 describes a system wherein the receiver/computer can perform its own caching, calculating, and 

comparing functions. See ’717 patent col. 7 ll. 27–37. But 

the mere fact that the receiver/computer can perform

those functions in the invention’s most basic embodiment 

does not mean that the claim term “receiver/computer” is 

the same as, or is broad enough to include, the separately 

identified “gateway” and “caching computer” that are 

associated only with the invention’s more complicated 

Figure 11 embodiment. To the contrary, each time the 

terms “gateway” and “caching computer” are used in the 

’717 patent, they are differentiated from the “sender/computer” and “receiver/computer.”

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The Board’s reliance on the specification’s statement 

that the gateway may be “integrally formed with the 

caching computer,” id. at col. 9 ll. 6–8, is misplaced. The 

cited sentence merely explains that the gateway and the 

caching computer can be integrated together; it says 

nothing about integration of those intermediaries with 

the sender/computer and receiver/computer. Nor was the 

Board correct in basing its constructions on an observation that the described computers may or may not be 

located in separate housings. The patent does not use the 

word housing at all, much less give any indication that 

the proper construction of “sender/computer” and “receiver/computer” depends on the physical location of the 

claimed computers. Stated simply, the Board’s construction of “sender/computer” and “receiver/computer” to 

include the intermediary gateway and caching computers 

does not reasonably reflect the language and disclosure of 

the ’717 patent.

Because the Board’s determination that claims 1, 3, 

10, 22, and 23 were unpatentable was based on an unreasonably broad construction of the terms “sender/computer” and “receiver/computer,” we vacate the 

Board’s findings of unpatentability of claims 1, 3, 10, 22, 

and 23 and remand for proceedings consistent with this 

opinion.

C 

For its part, Microsoft challenges the Board’s construction of the phrase “searching for data with the same 

digital digest in said network cache memory” in independent claim 22, and incorporated in dependent claim 

24. Claim 22 reads: 

22. A method for increased data access performed 

by a receiver/computer in a packet-switched network, said receiver/computer including an operating unit, a first memory, a permanent storage 

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memory, a processor and a network cache 

memory, said method comprising the steps of:

receiving a message containing a digital digest 

from said network;

searching for data with the same digital digest in 

said network cache memory, 

if data having the same digital digest as the digital digest received is not uncovered, forming a 

negative indication signal and transmitting it 

back through said network; and

creating a digital digest for data received from 

said network cache memory.

’717 patent col. 12 ll. 30–45 (emphasis added). Claim 24 

adds an additional requirement that is not at issue in this 

appeal.

Before the Board, Microsoft contended that the ’717 

patent equates “search” with “check for,” and that the 

searching step of claim 22 means comparing only two

individual digest values against one another to determine 

whether they match. Proxyconn contended that the 

searching step instead means identifying, from among a 

set of data objects, a data object with the matching digital 

digest. The Board agreed with Proxyconn, concluding 

that the searching step required the ability to identify a 

particular data object with the same digital digest from a 

set of potentially many data objects stored in the network 

cache memory. The Board then concluded that claim 24, 

which depends from claim 22, was not rendered invalid by 

the Yohe and/or Perlman references. 

The Board correctly construed the phrase “searching

for data with the same digital digest in said network 

cache memory.” Although the word “searching” is not 

defined in the ’717 patent, it is used several times 

throughout the specification. For example, the ’717 

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patent states that the receiver/computer “searches its 

network cache memory 48 for data with the same digest.” 

’717 patent col. 7 ll. 56–57. This sentence makes clear 

that the action of “searching” is performed on the entire 

network cache memory, not just on a single data object. 

The patent further explains that the action of “searching” 

can be performed on multiple, different memory storages: 

the “receiver/computer 46 may search not only in its 

network cache memory 48, but also in predefined locations in its permanent storage memory.” Id. at col. 8 ll. 

50–53. Not only does the specification use the term 

“searching” to mean checking amongst a set of data objects, it also uses the term “searching” in a way that is 

distinct from the term “comparing,” the latter of which is 

used to describe the action of checking one digital digest 

against another: “The receiver/computer also has comparison means 54 for comparing between such a calculated 

digital digest and a digital digest received from the network.” Id. at col. 7 ll. 34–37. Microsoft’s proposed construction, which would essentially equate “searching” 

with “comparing,” would render the additional “comparing” language in the specification meaningless.

On appeal, Microsoft argues that Figure 5, which uses 

the term “check for,” supports its construction. Even if

Microsoft is correct that Figure 5’s “check for” language 

corresponds to the “searching” step, Microsoft has not 

explained why “check for” means something other than 

looking among a set of data objects. Indeed, other figures 

in the patent use the words “search for” and “look for” to 

describe the searching step. See Figs. 8, 12, 15. Microsoft’s reliance on Figure 5 is therefore misplaced.

Microsoft additionally argues that the Board’s construction is wrong because it would not make sense for 

the receiver/computer to compare a digest for a target 

data object (e.g., a legal brief) to digests of data objects

unrelated to that target data object (e.g., a lunch menu). 

According to Microsoft, “the patent’s algorithm requires 

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only a single digest-to-digest comparison operation.” 

Appellant’s Br. 9, ECF No. 19. But this argument suffers 

from the same flaw described above: “comparing” is not 

the same as “searching.” Microsoft acknowledges this

point in its brief, stating: “the ‘search’ for a matching data 

object ends with a comparison between a single pair of 

digests.’” Id. at 10. While it may true that the searching 

process ends with the comparison between the two target 

data objects, neither the claims nor specification limit the 

“searching” step to that final comparison. Based on the 

clear language of the specification, the Board was correct 

in concluding that the broadest reasonable interpretation 

of “searching for data with the same digital digest in said 

network cache memory” includes searching in a set of 

potentially many data objects.1 

On appeal, Microsoft’s only argument for reversing 

the Board’s determination on claim 24 is that the Board’s 

construction of claim 22’s “searching” limitation was 

wrong. Because we agree with the Board’s construction, 

and because Microsoft does not alternatively argue that 

claim 24 is unpatentable even under the correct construction, we affirm the Board’s determination that claim 24 is 

patentable. 

III

Having vacated and remanded the Board’s patentability determinations with respect to claims 1, 3, 6, 7, 9–10, 

22, and 23, and affirmed the Board’s patentability determination with respect to claim 24, the only patentability 

determinations left for us to address are those relating to 

claims 11, 12, and 14. 

1 We would reach the same result if we were to apply the traditional claim construction framework set forth 

in Phillips, 415 F.3d 1303.

 

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The Board concluded that claims 11, 12, and 14 were 

anticipated by the DRP reference. DRP describes a 

protocol for the efficient replication of data over the 

internet. DRP explains that the inefficiency of downloading the same data more than once can be avoided through 

the use of “content identifiers” uniquely associated with 

individual pieces of data. The content identifiers are 

compiled into an index, which serves as a snapshot of the 

state of a set of files at any given time, and which is 

retrieved by a client using a normal “GET” request. After 

a client’s initial data download, a client can update content by downloading a new version of the index and 

comparing it against the previous versions of the index. 

Because each file entry in the index has a content identifier, the client can determine which files have changed 

and thus need to be downloaded in order to bring the 

client up to date. 

On appeal, Proxyconn argues that DRP does not disclose “receiving a response signal” recited in independent 

claim 11, and incorporated into dependent claims 12 and 

14. Representative claim 11 reads:

11. A method performed by a sender/computer in 

a packet-switched network for increasing data access, said sender/computer including an operating 

unit, a first memory, a permanent storage 

memory and a processor and said sender/computer being operative to transmit data to a 

receiver/computer, the method comprising the 

steps of:

creating and transmitting a digital digest of said 

data from said sender/computer to said receiver/computer;

receiving a response signal from said receiver/computer at said sender/computer, said response signal containing a positive, partial or 

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negative indication signal for said digital digest, 

and

if a negative indication signal is received, transmitting said data from said sender/computer to 

said receiver/computer.

’717 patent col. 11 ll. 34–48 (emphasis added).

In particular, Proxyconn argues that because the DRP 

protocol is client-driven (e.g., because DRP’s client determines which files it needs to download to bring itself up to 

date), there is no disclosure that DRP’s server “understands whether the files downloaded by the client are 

related to an index previously downloaded by the client, 

or not.” Cross-Appellant’s Br. 55, ECF No. 22. According 

to Proxyconn, “the file download by the client is not linked 

to a prior index download, and therefore CANNOT be 

considered a ‘response’” as required by claim 11. Id. 

Proxyconn’s argument fails for the simple reason that 

nothing in claim 11 requires that the sender/computer 

“understand” whether a request from the receiver/computer is correlated with a previous transmission. 

As Microsoft points out, once the receiver/computer in the 

’717 patent is unable to find a matching digital digest and 

sends a negative indication to the sender/computer, “all 

that’s needed from the server is to transmit the desired 

file, whether or not it ‘understands’ what led the receiver 

to send that negative indication.” Appellant’s Resp. and 

Reply Br. 22, ECF No. 28. 

We agree with the Board that the download requests 

that DRP’s client sends to the server after receiving the 

index from the server and comparing it to the local index 

meets the “receiving a response signal” limitation of claim 

11. As the Board explained, the DRP client either sends a 

GET request (when none of the content identifiers are up 

to date), a differential GET request (when some, but not 

all, of the content identifiers are up to date), or no request 

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(when all content identifiers are up to date). These three 

types of requests correspond to the “response signal 

containing a positive, partial, or negative indication 

signal” recited in claim 11. For these reasons, we conclude that the Board did not err in concluding that DRP 

anticipates claims 11, 12, and 14 of the ’717 patent.

IV

Finally, Proxyconn challenges the Board’s denial of its 

motion to amend claims 1 and 3.2 Before reaching the 

merits of Proxyconn’s arguments, we first discuss the 

legal framework governing amendments during IPRs.

A 

Through enactment of the America Invents Act 

(“AIA”), Congress created the new IPR proceeding for the 

purpose of “providing quick and cost effective alternatives 

to litigation.” H.R. Rep. No. 112-98, pt. 1, at 48 (2011), 

2011 U.S.C.C.A.N. 67, 78. The AIA conveys certain 

authority to the PTO to “prescribe regulations” “governing 

inter partes review” and to “set[] forth standards and 

procedures for allowing the patent owner to move to 

amend the patent.” 35 U.S.C. § 316(a)(4), (a)(9). With 

respect to amendments in particular, the statute provides 

that “the patent owner may file 1 motion to amend the 

patent” and that such amendment “may not enlarge the 

scope of the claims of the patent or introduce new matter.” 

Id. § 316(d)(1), (d)(3). The statute also provides that the 

Director shall, upon final determination, “incorporate[] in 

the patent . . . any new or amended claim determined to 

be patentable.” Id. § 318(b). 

2 Proxyconn’s motion sought to amend a number of 

other claims as well. But because Proxyconn’s appeal 

challenges only the Board’s denial of its motion with 

respect to claims 1 and 3, we review the Board’s actions 

regarding these two claims only. 

 

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Relying on the authority granted by the AIA, the PTO 

has promulgated two regulations that are relevant to this 

appeal. First is 37 C.F.R. § 42.20, which applies generally 

to motions practice. Section 42.20 requires that any 

“[r]elief, other than a petition requesting the institution of 

a trial, must be requested in the form of a motion” and 

that “[t]he moving party has the burden of proof to establish that it is entitled to the requested relief.” § 42.20(a), 

(c). Second is 37 C.F.R. § 42.121, which imposes specific 

requirements on the amendment process. Section 

42.121(a)(2) provides that: “A motion to amend may be 

denied where: (i) The amendment does not respond to a 

ground of unpatentability involved in the trial; or (ii) The 

amendment seeks to enlarge the scope of the claims of the 

patent or introduce new subject matter.” 

In addition to these two regulations, a six-member 

panel of the Board has also issued a decision called Idle 

Free Systems, Inc. v. Bergstrom, Inc., IPR2012-00027, 

2013 WL 5947697 (PTAB June 11, 2013). In Idle Free, 

the panel stated that it was providing “a general discussion of several important requirements for a patent

owner’s motion to amend claims.” Id. at *1. Relying on

§ 42.20(c), the Idle Free decision requires that, in motions 

to amend during IPRs:

A patent owner should identify specifically the 

feature or features added to each substitute claim, 

as compared to the challenged claim it replaces, 

and come forward with technical facts and reasoning about those feature(s), including construction 

of new claim terms, sufficient to persuade the 

Board that the proposed substitute claim is patentable over the prior art of record, and over prior art not of record but known to the patent 

owner. The burden is not on the petitioner to 

show unpatentability, but on the patent owner to 

show patentable distinction over the prior art of 

record and also prior art known to the patent 

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20 MICROSOFT CORPORATION v. PROXYCONN, INC. 

owner. Some representation should be made 

about the specific technical disclosure of the closest prior art known to the patent owner, and not 

just a conclusory remark that no prior art known 

to the patent owner renders obvious the proposed 

substitute claims. 

A showing of patentable distinction can rely on 

declaration testimony of a technical expert about 

the significance and usefulness of the feature(s) 

added by the proposed substitute claim, from the 

perspective of one with ordinary skill in the art, 

and also on the level of ordinary skill, in terms of 

ordinary creativity and the basic skill set. A mere 

conclusory statement by counsel, in the motion to 

amend, to the effect that one or more added features are not described in any prior art, and would 

not have been suggested or rendered obvious by 

prior art, is on its face inadequate. 

Id. at *4–5.

The Idle Free decision has been designated as “informative.” According to the Board’s operating procedures, informative decisions are “not binding authority,” 

but are designated as informative in order to provide 

“Board norms on recurring issues,” “guidance on issues of 

first impression,” and “guidance on Board rules and 

practices.” See Patent Trial and Appeal Board, Standard 

Operating Procedure 2 (Revision 9), at 3 (¶ IV.A–B),

available at http://www.uspto.gov/sites/default/files/

documents/sop2-revision-9-dated-9-22-2014.pdf. The 

Board has frequently cited to Idle Free when denying 

motions to amend during IPRs. See, e.g., The Scotts Co. v. 

Encap, LLC, IPR2013-00110, 2014 WL 2886290, at *18–

20 (PTAB June 24, 2014); Ecowater Sys. LLC v. Culligan 

Int’l Co., IPR2013-0155, 2014 WL 2903758, at *18 (PTAB 

June 24, 2014); Adidas AG v. Nike, Inc., IPR2013-00067, 

2014 WL 1713368, at *17–18 (PTAB Apr. 28, 2014).

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B 

We turn now to the events of this case. During the 

IPR, Proxyconn sought to amend the ’717 patent by 

replacing challenged claims 1 and 3 with substitute 

claims 35 and 36, respectively. In its opposition, Microsoft argued, inter alia, that the substitute claims were 

unpatentable for anticipation by DRP. DRP was not one 

of the references over which the PTO originally instituted 

review of claims 1 and 3. It was, however, used both as 

an anticipation and an obviousness reference over which 

the PTO instituted review of claims 6, 7, 9, 11, 12, and 14. 

In its reply, Proxyconn argued that because DRP was not 

one of the references over which the PTO had instituted 

review of claims 1 and 3, the Board exceeded its authority 

under § 42.121(a)(2)(i) to deny substitute claims 35 and 36

for failure to “respond to a ground of unpatentability 

involved in the trial.” Proxyconn did not otherwise argue 

that substitute claims 35 and 36 were patentable over 

DRP.

In its final written decision, the Board denied Proxyconn’s motion to amend claims 1 and 3 for two reasons.3 

First, citing § 42.20(c) and Idle Free, the Board held that

Proxyconn failed to meet its burden of establishing patentability of the substitute claims. In particular, the 

Board stated: 

Proxyconn has not proffered sufficient arguments 

or evidence to establish a prima facie case for the 

patentability of claims 35–41. For example, 

3 With respect to claim 3, the Board also denied 

Proxyconn’s motion on grounds that substitute claim 36 

impermissibly enlarged the scope of claim 3 in violation of 

35 U.S.C. § 316(d)(3). Because we resolve this case on 

other grounds, we do not review this additional basis for 

the Board’s denial of Proxyconn’s motion.

 

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22 MICROSOFT CORPORATION v. PROXYCONN, INC. 

Proxyconn has not: (i) construed the newly added 

claim terms; (ii) addressed the manner in which 

the claims are patentable generally over the art; 

(iii) identified the closest prior art known to it; (iv) 

addressed the level of ordinary skill in the art at 

the time of the invention; or (v) discussed how 

such a skilled artisan would have viewed the newly recited elements in claims 35–41 in light of 

what was known in the art. Instead, Proxyconn 

attempts to distinguish claims 35–41 only from 

the prior art for which we instituted review of corresponding claims 1, 3, 6, 10. 11. 22, and 23. Mot. 

Amend 4–15. Consequently, Proxyconn has failed 

to establish a prima facie case for the patentability of claims 35–41.

Board Decision at 55. 

Second, the Board rejected Proxyconn’s argument that 

§ 42.121(2)(a)(i) precluded the Board from relying on the 

DRP reference. Again citing § 42.20(c), the Board stated 

that “Proxyconn carries the burden of proof with respect 

to the patentability of its proposed claims” and that 

“Microsoft [was] entitled” to rely on DRP. Id. at 56. 

Because “Proxyconn provide[d] no evidence to counter 

Microsoft’s contentions that DRP anticipate[d] [claims 35 

and 36],” the Board denied Proxyconn’s motion. Id. 

On appeal, Proxyconn argues that § 42.121(a)(2) provides a complete list of the bases for which the Board can 

deny a motion to amend. According to Proxyconn, the 

Board exceeded its own regulation by imposing the additional requirements of Idle Free and by relying on the 

DRP reference. The Director defends the Board’s actions, 

arguing that § 42.121(a)(2) is not exhaustive. According 

to the Director, a patentee seeking to amend its claims 

during IPRs must meet both the “procedural requirements” of § 42.121(a)(2) as well as the “substantive burden” imposed by § 42.20(c), as it has been interpreted 

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through adjudicative Board decisions like Idle Free. 

Intervenor’s Resp. Letter 2, ECF No. 50.

This appeal, therefore, presents the question of whether the Board permissibly relied on the requirements of 

Idle Free and the DRP reference in denying Proxyconn’s 

motion to amend. We review Board decisions using the 

standards set forth in the Administrative Procedure Act, 5 

U.S.C. § 706. In re Sullivan, 362 F.3d 1324, 1326 (Fed. 

Cir. 2004). “Under that statute, we set aside actions of 

the Board that are arbitrary, capricious, an abuse of 

discretion, or otherwise not in accordance with law, and 

set aside factual findings that are unsupported by substantial evidence.” Id. “We accept the Board’s interpretation of Patent and Trademark Office regulations unless 

that interpretation is ‘plainly erroneous or inconsistent

with the regulation.’” Id. (quoting Eli Lilly Co. v. Bd. of 

Regents of the Univ. of Wash., 334 F.3d 1264, 1266 (Fed. 

Cir. 2003)); see also Auer v. Robbins, 519 U.S. 452, 461–62 

(1997); In re Garner, 508 F.3d 1376, 1378 (Fed. Cir. 2007). 

C 

At the threshold, we agree with the Director that 

§ 42.121(a)(2) is not an exhaustive list of grounds upon 

which the Board can deny a motion to amend. In the AIA, 

Congress gave the PTO authority to “prescribe regulations” “governing inter partes review” and to “set[] forth 

standards and procedures for allowing the patent owner 

to move to amend the patent.” § 316(a)(4), (a)(9). Congress also provided that, upon final decision, the Director 

should incorporate only those amended claims that are 

“determined to be patentable.” § 318(b). Given these 

directives, the PTO promulgated both the general regulation setting forth the patentee’s burden to establish it is 

entitled to its requested relief, § 42.20, as well as the more 

specific regulation setting forth particular requirements 

regarding the amendment process, § 42.121. Both regulations are plainly applicable to motions to amend filed 

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24 MICROSOFT CORPORATION v. PROXYCONN, INC. 

during IPRs, and Proxyconn does not argue that the PTO 

acted outside its statutory authority in promulgating 

either one.

What Proxyconn does challenge is the Board’s interpretation of those regulations as permitting it to deny 

Proxyconn’s motion to amend claims 1 and 3 for failure to 

establish patentability over DRP—a reference that the 

Board did not rely on when instituting review of those

particular claims. The Director responds that its authority to do so comes from § 42.20(c), as it has been interpreted in Idle Free—namely, as requiring the patentee “to 

show patentable distinction [of the substitute claims] over 

the prior art of record.” Idle Free, 2013 WL 5947697, at 

*4. According to the Director, it is permissible for the 

PTO to use adjudicative Board decisions like Idle Free, 

rather than traditional notice and comment rule-making, 

to set forth all the conditions that a patentee must meet 

in order to satisfy its burden of amendment under 

§ 42.20(c). 

Some question the wisdom of the PTO’s approach. 

Since IPRs were created, they have rapidly become a

popular vehicle for challenging the validity of issued 

patents. See Patent Trial and Appeal Board 

AIA Progress, available at http://www.uspto.gov/sites/

default/files/documents/aia_statistics_05-14-2015.pdf

(reporting 2,894 IPR petitions received as of May 14, 

2015). Patentees who wish to make use of the statutorily 

provided amendment process deserve certainty and 

clarity in the requirements that they are expected to 

meet. A fluid, case-based interpretation by the PTO of its 

own regulations risks leaving interested members of the 

public in a state of uncertainty, without ascertainable 

standards and adequate notice to comply.

Despite such concerns, we recognize that “the choice 

between rulemaking and adjudication lies in the first 

instance within the [agency’s] discretion.” NLRB v. Bell 

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MICROSOFT CORPORATION v. PROXYCONN, INC. 25

Aerospace Co. Div. of Textron, 416 U.S. 267, 294 (1974). 

The Director argues that adjudication is appropriate here 

because the PTO “has not ‘had sufficient experience with 

[motions to amend] to warrant rigidifying its tentative 

judgment into a hard and fast rule’” and that the PTO 

“thus ‘must retain power to deal with [such motions] on a 

case-by-case basis if the administrative process is to be 

effective.’” Intervenor’s Resp. Letter 3, ECF No. 50 (alterations in original) (quoting SEC v. Chenery Corp., 332 

U.S. 194, 202–03 (1947)). Because there is merit to these 

arguments, we cannot say that the PTO has abused its 

discretion in choosing adjudication over rulemaking. 

Nor can we say that the Board’s interpretation of 

§ 42.20(c) in Idle Free—requiring the patentee to “show 

patentable distinction [of the substitute claims] over the 

prior art of record,” Idle Free, 2013 WL 5947697, at *4—is 

plainly erroneous or inconsistent with the regulation or 

governing statutes.4 The legal framework provides that a 

patentee must “move to amend the patent,” § 316(a)(9), 

4 Importantly, this case does not call on us to decide 

whether every requirement announced by the Board in 

Idle Free constitutes a permissible interpretation of the 

PTO’s regulations. The Idle Free decision is not itself 

before us, and we resolve this case only with respect to 

the Board’s having faulted Proxyconn for “attempt[ing] to 

distinguish claims [35 and 36] only from the prior art for 

which we instituted review of corresponding claims [1 and 

3]” and, ultimately, for “fail[ing] to establish by a preponderance of evidence that [claims 35 and 36] are patentable 

over DRP.” Board Decision at 55–56. We do not address

the other requirements of Idle Free that the Board relied 

upon. Nor do we address, for example, Idle Free’s requirement that the patentee to show patentable distinction over all “prior art known to the patent owner.” Idle 

Free, 2013 WL 5947697, at *4.

 

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26 MICROSOFT CORPORATION v. PROXYCONN, INC. 

that the Director should incorporate only those amended 

claims that are “determined to be patentable,” § 318(b), 

and that the patentee has the burden to “establish that it 

is entitled to the requested relief,” § 42.20(c). 

The Board has reasonably interpreted these provisions as requiring the patentee to show that its substitute

claims are patentable over the prior art of record, at least 

in the circumstances in this case. First, nothing in the 

statute or regulations precludes the Board from rejecting 

a substitute claim on the basis of prior art that is of 

record, but was not cited against the original claim in the 

institution decision. Second, the very nature of IPRs 

makes the Board’s interpretation appropriate. During 

IPRs, once the PTO grants a patentee’s motion to amend, 

the substituted claims are not subject to further examination. Moreover, the petitioner may choose not to challenge the patentability of substitute claims if, for 

example, the amendments narrowed the claims such that 

the petitioner no longer faces a risk of infringement. If 

the patentee were not required to establish patentability 

of substitute claims over the prior art of record, an 

amended patent could issue despite the PTO having 

before it prior art that undermines patentability. Such a 

result would defeat Congress’s purpose in creating IPR as 

part of “a more efficient and streamlined patent system 

that will improve patent quality and limit unnecessary 

and counterproductive litigation costs.” H.R. Rep. No. 

112-98, pt. 1, at 40 (2011), 2011 U.S.C.C.A.N. 67, 69. 

Proxyconn argues that the Board’s actions are in conflict with § 42.121(a)(2)(i). But Proxyconn confuses requirements governing permissible reasons for seeking 

amendment versus those governing what must ultimately 

be shown of amended claims. Section 42.121(a)(2)(i) 

simply requires that a patentee’s amendment be made in 

order to “respond to a ground of unpatentability involved 

in the trial,” and not for some other reason. As the PTO 

explained, this rule is meant to “enhance efficiency of 

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review proceedings . . . . [A]ny amendment that does not 

respond to a ground of unpatentability most likely would 

cause delay, increase the complexity of the review, and 

place additional burdens on the petitioner and the Board.” 

Changes to Implement Inter Partes Review Proceedings, 

Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents, 77 Fed. Reg. 

48,680, 48,705 (Aug. 14, 2012). Assuming an amendment 

is appropriately responsive to the grounds of unpatentability involved in the trial, the patentee must still go on to 

show that it is entitled to its substitute claim. The PTO 

explained this as well, stating that a motion to amend

“will be entered so long as it complies with the timing and 

procedural requirements” but “even if entered, will not 

result automatically in entry of the proposed amendment 

into the patent.” Id. at 48,690. Requiring the patentee to 

establish that its substitute claims are patentable over 

the prior art of record does not run afoul of 

§ 42.121(a)(2)(i). 

Proxyconn also argues that the Board’s interpretation 

and reliance on DRP was “fundamentally unfair” because 

Proxyconn was unable to defend substitute claims 35 and 

36 against that reference. Cross-Appellant’s Resp. Letter 

2, ECF No. 51. We reject that argument. Although DRP 

was not one of the original references for which review of 

claims 1 and 3 was instituted, it was very much a part of 

the entire proceedings. In particular, it was relied on by 

the Board for instituting review of six closely related 

claims. And after Microsoft filed an opposition brief 

arguing that substitute claims 35 and 36 were invalid 

over DRP, Proxyconn had the opportunity to distinguish 

those claims from DRP in its reply brief but simply chose 

not to do so. Lastly, at the oral hearing, the Board explained to Proxyconn that Proxyconn was required to 

demonstrate the patentability of substitute claims 35 and 

36 over the DRP reference. This is not a case in which the 

patentee was taken by surprise by the Board’s reliance on 

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28 MICROSOFT CORPORATION v. PROXYCONN, INC. 

an entirely new reference or was not given adequate 

notice and opportunity to present arguments distinguishing that reference. Rather, this is a case where the prior 

art relied on by the Board was front and center throughout the course of the proceedings.

For all of these reasons, we conclude that the Board 

acted permissibly in requiring Proxyconn to establish the 

patentability of substitute claims 35 and 36 over the DRP 

reference. And based on Proxyconn’s failure to do so, we 

affirm the Board’s denial of Proxyconn’s motion to amend 

claims 1 and 3. 

V 

For the foregoing reasons, we reverse the Board’s constructions of the term “gateway . . . between at least two 

other computers” in claims 6, 7, and 9 and the terms 

“sender/computer” and “receiver/computer” in claims 1, 3, 

10, 22, and 23, and therefore vacate and remand its 

unpatentability determinations of those claims. We 

affirm the Board’s construction of the “searching” limitation in claim 22, the Board’s determination that claim 24 

is patentable, and the Board’s conclusion that DRP anticipates claims 11, 12, and 14. We also affirm the Board’s 

denial of Proxyconn’s motion to amend claims 1 and 3. 

AFFIRM-IN-PART, REVERSE-IN-PART, VACATEIN-PART, AND REMAND

COSTS

Each party shall bear its own costs. 

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