Microsoft v. Proxyconn (IPR2012-00026, Paper 17): Instituting Review and Construing the Claims

Microsoft Corp. v. Proxyconn, Inc., IPR2012-00026, was one of the earliest inter partes reviews and one of the most closely followed. Paper 17, entered December 21, 2012, is the decision to institute. Microsoft challenged claims 1, 3, 10–12, 14 and 22–24 of U.S. Patent 6,757,717. Proxyconn waived its preliminary response under 37 C.F.R. § 42.107(b).

Later papers from the same trial are covered separately: the joinder of Microsoft’s second petition (IPR2013-00109) and the denial of discovery on commercial success (Paper 32).

Background

The ‘717 patent addresses redundant data transfer over a network. A sender computes a “digital digest” (a fingerprint) of data and sends it first; if the receiver already holds data with the same digest, it uses that data instead of receiving it again. In a second embodiment, auxiliary digests let the sender transmit only the difference between versions, and the receiver answers with a positive, partial or negative indication signal.

Microsoft relied on four references, Perlman, Yohe, Santos and Baber, for anticipation, and on Perlman with Yohe for obviousness.

What the Board decided

Claim construction

Applying the broadest reasonable construction, the Board:

• adopted the patentee’s definitions of “data,” “difference” and “digital digest,” declining Microsoft’s invitation to narrow “digital digest” further, out of respect for the patentee’s right to act as lexicographer;
• construed “negative indication signal” to include the absence of a signal, as the specification itself described;
• read “a positive, partial or negative indication signal” in claim 11 to require that all three signals be issued as required, rejecting Microsoft’s argument that the alternatives were optional and entitled to no patentable weight;
• declined to treat “operating unit” as means-plus-function and gave it its plain meaning; and
• treated “means for comparison between digital digests” as means-plus-function. The Board noted that indefiniteness under § 112 was not before it, because 35 U.S.C. § 311(b) limits IPR to grounds under §§ 102 and 103. Relying on the Federal Circuit’s narrow exception for functions any general-purpose computer can perform, it construed the corresponding structure as a general-purpose computer.

The Baber ground

Microsoft discussed Baber but never applied it to the claims in its charts or elsewhere. The Board pointed to 37 C.F.R. § 42.22(a)(2), which requires a full statement of reasons with a detailed explanation of the evidence, and § 42.104(b)(4), which requires the petition to specify where each claim element is found. Claim charts are not mandatory, but some claim-by-claim analysis is. The Baber ground did not meet the threshold.

The outcome

The Board found a reasonable likelihood under 35 U.S.C. § 314(a) that claims 1, 3, 10 and 22–24 were unpatentable. It instituted on four grounds: anticipation by Perlman, by Yohe and by Santos (each for a specified set of claims), and obviousness over Perlman and Yohe. For claim 10, which requires storage in “permanent” memory, Perlman alone was not enough, but the Perlman–Yohe combination was. Claims 11, 12 and 14 were denied because Microsoft’s case rested on its rejected reading of the indication-signal language.

Why it matters

• Explain every ground against every claim. A reference discussed in general terms but never mapped to the claims will not support institution.
• Lexicography is honored. Where the specification defines a term, the Board generally adopts the definition.
• “Optional” claim language arguments are risky. The Board read claim alternatives in light of the specification, not in isolation. See claim construction during inter partes review.
• Means-plus-function terms must still be construed in IPR, even though indefiniteness cannot be raised as a ground.

Later developments

The trial ended in a final written decision that was appealed. In Microsoft Corp. v. Proxyconn, Inc. (Fed. Cir. 2015), the Federal Circuit addressed the Board’s claim constructions and its handling of Proxyconn’s motion to amend. The court’s discussion of the patent owner’s burden on a motion to amend was later displaced by Aqua Products, Inc. v. Matal (Fed. Cir. 2017) (en banc); see amending claims during inter partes review.

Two other changes affect how this decision reads today. For petitions filed on or after November 13, 2018, the Board applies the Phillips claim construction standard. And after SAS Institute Inc. v. Iancu (2018), the Board no longer institutes on some challenged claims while denying others.

Key takeaways

• The Board instituted review of claims 1, 3, 10 and 22–24 and denied claims 11, 12 and 14.
• A ground the petition never applied to the claims failed under §§ 42.22(a)(2) and 42.104(b)(4).
• The patentee’s own definitions controlled, and claimed alternatives were read in light of the specification.
• Claim construction standards and partial institution have since changed.