Microsoft Corp. v. Proxyconn, Inc.

• Decision Date: 16 June 2015
• Docket Number: 2014–1543.,Nos. 2014–1542,s. 2014–1542
• Citation: 789 F.3d 1292,115 U.S.P.Q.2d 1198
• Parties: MICROSOFT CORPORATION, Appellant v. PROXYCONN, INC., Cross–Appellant v. Michelle K. Lee, Director, U.S. Patent and Trademark Office, Intervenor.
• Court: U.S. Court of Appeals — Federal Circuit

789 F.3d 1292

115 U.S.P.Q.2d 1198

MICROSOFT CORPORATION, Appellant

v.PROXYCONN, INC., Cross–Appellant

v.Michelle K. Lee, Director, U.S. Patent and Trademark Office, Intervenor.

Nos. 2014–1542

2014–1543.

United States Court of Appeals, Federal Circuit.

June 16, 2015.

John D. Vandenberg, Klarquist Sparkman, LLP, Portland, OR, argued for appellant. Also represented by Stephen J. Joncus, Carla Todenhagen.

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.^*

Opinion

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 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 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.

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., ––– U.S. ––––, 135 S.Ct. 831, ––– L.Ed.2d –––– (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 determinations 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, 1267 (Fed.Cir.2009) ; see also In re Suitco Surface, Inc., 603 F.3d 1255, 1260 (Fed.Cir.2010) (“The broadest-construction 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, 978 (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:

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

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