The Federal Circuit issued its first reversal and remand of a final decision in an inter partes review issued by the Patent Trial and Appeal Board (“PTAB”). In Microsoft Corporation v. Proxyconn, Inc., No. 14-1543, a panel composed of Chief Judge Prost, Judge Lourie, and Judge Gilstrap (sitting by designation) held that the PTAB’s constructions of the phrases “two other computers,” “sender/computer,” and “receiver/computer” were unreasonably broad, and remanded for further proceedings consistent with its opinion. The Court’s decision marks the first ever reversal of an inter partes review decision by the PTAB, after 18 straight affirmances. Of the 18, fifteen have been affirmances without opinion issued under Federal Circuit Rule 36.

In brief, the Court upheld the PTAB’s use of the broadest reasonable interpretation (“BRI”) standard, but explained that the standard does not justify giving claims an unreasonably broad or legally incorrect interpretation. The Court then examined the statute and regulations governing amendment practice and concluded that the PTAB’s interpretation was not plainly erroneous or inconsistent with them. Last, in reference to the PTAB’s case-by-case interpretation of the same statute and regulations, the Court explained that while “[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 . . . we cannot say that the PTO has abused its discretion in choosing adjudication over rulemaking.”