This appeal arose from the inter partes review (IPR) of U.S. Patent No. 6,757,717 (’717 patent) owned by Proxyconn.  In the IPR, the PTAB 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.  Microsoft appealed the Board’s determination that claim 24 is patentable.

Proxyconn cross-appealed, 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.

Microsoft filed two separate IPR petitions on the '717 patent, each challenging different claims.

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.  The PTAB determined that all of the claims except claim 24 were unpatentable.  The PTAB also denied Proxyconn's motion to amend claims 1 and 3, concluding 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.

Proxyconn's first argument on appeal was that, because a patentee has limited ability to amend claims, the broadest reasonable interpretation standard (BRI) should not apply during IPRs.  The court ruled that BRI is the proper standard, citing an earlier case (In re Cuozzo, LLC, 778 F.3d 1271 (Fed. Cir. 2015)).  However, the court noted that the BRI must still be reasonable, and that giving claims their broadest reasonable interpretation does not include giving claims a legally incorrect interpretation.  Under the broadest reasonable interpretation, the PTAB's construction “cannot be divorced from the specification and the record evidence."

Proceeding from that holding, the court examined the interpretation given by the PTAB to the claims at issue.  After examining the claim constructions de novo, the court held in several instances that the interpretation given by the PTAB was unreasonable, and vacated and remanded the PTAB's findings of unpatentability.

Regarding the PTAB's denial of Proxyconn's motion to amend, the court noted that the American Invents Act (AIA) conveys certain authority to the PTO to prescribe regulations governing IPR, and to set forth standards and procedures for allowing the patent owner to move to amend the patent.  The court recognized two relevant regulations, namely 37 C.F.R. § 42.20, which 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,” as well as 37 C.F.R. § 42.121, which imposes specific requirements on the amendment process.  Relevant to this case, § 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 regulations, the court also discussed Idle Free Systems, Inc. v. Bergstrom, Inc., a PTAB decision designated "informative" which interprets these two regulations.  In Idle Free, the PTAB held, among other things, that when moving to amend, the burden is on the patent owner to show patentable distinction over the prior art of record and also prior art known to the patent owner, and that 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.

In its motion to amend, Proxyconn did not articulate reasons for patentability over the DRP reference, which was not used to reject 1 and 3, but was used to reject other claims.  Proxyconn attempted to argue on appeal that § 42.121(a)(2) provides a complete list of the bases for which the Board can deny a motion to amend, and that the PTAB exceeded its own regulation by imposing the additional requirements of Idle Free.  The court disagreed, holding that it is within the PTO's discretion whether to rely on rulemaking or adjudication, and affirmed denial of motion to amend.

This case is notable for being the first case in which the Federal Circuit reversed a decision by the PTAB.  It shows that Federal Circuit is willing to engage in claim construction determinations, even though in the past they have often affirmed without a written opinion.  This case also confirms the courts earlier decision holding that the BRI standard is appropriate for IPRs, and gives the USPTO wide latitude in setting standards for IPRs.