Technology Information Law Blog by Charles Gideon Korrell

Day: February 14, 2026

  • Netflix v. DivX: Federal Circuit Reaffirms the Rule of the Last Antecedent in Claim Construction

    Netflix v. DivX: Federal Circuit Reaffirms the Rule of the Last Antecedent in Claim Construction

    Netflix, Inc. v. DivX, LLC presents a deceptively simple question of grammar that ultimately determined the fate of an inter partes review. In a precedential opinion authored by Judge Taranto, the Federal Circuit reversed the Patent Trial and Appeal Board’s claim construction, vacated its final written decision, and remanded for further proceedings.

    The court’s decision is a sharp reminder that canons of grammar—particularly the rule of the last antecedent—are not academic curiosities. They can decide whether a claim survives or falls. And here, they did.

    The Technology: Partial Encryption in Adaptive Bitrate Streaming

    DivX’s U.S. Patent No. 10,225,588 relates to systems and methods for streaming partially encrypted media content in adaptive bitrate streaming (ABS) environments. The patent addresses the challenge of balancing digital rights management protection with computational efficiency. Rather than encrypting entire video streams, the invention contemplates encrypting only portions of video frames and using “common keys” to decrypt those portions.

    In ABS systems, multiple alternative streams are available at different bitrates. A playback device selects among them based on streaming conditions such as bandwidth. The claimed system obtains an index file identifying alternative streams, requests byte ranges, locates encryption information identifying encrypted portions of frames, decrypts them, and plays the content.

    The claim language at issue was limitation [l] of claim 1:

    locating encryption information that identifies encrypted portions of frames of video within the requested portions of the selected stream of protected video.

    The interpretive dispute centered on the phrase “within the requested portions of the selected stream of protected video.” Did that modifier apply to:

    • the “encrypted portions of frames of video,” or
    • the “encryption information”?

    The answer dictated whether the prior art satisfied the limitation.

    The Procedural Path: Two Board Decisions, One Federal Circuit Reset

    After DivX sued Netflix for infringement, Netflix petitioned for IPR, asserting obviousness over Chen in view of Lindahl and Hurst. The Board instituted review.

    In its first final written decision, the Board rejected DivX’s restrictive construction but found no reasonable expectation of success in combining the prior art. The Federal Circuit vacated that determination in 2023 and remanded.

    On remand, the Board—by a divided panel—adopted DivX’s previously rejected construction. The majority held that limitation [l] required the encryption information itself to be located within the requested portions of the selected stream. Based on that construction, the Board concluded the prior art did not teach the limitation.

    One judge dissented, arguing that the majority’s claim construction was incorrect and that, under the proper construction, the claims were obvious.

    Netflix appealed again. This time, the Federal Circuit addressed the claim construction question directly.

    The Core Issue: Grammar as Law

    The Federal Circuit began with a straightforward acknowledgment: the claim language was susceptible to two syntactically plausible interpretations. The modifier could attach to either possible referent.

    When confronted with such ambiguity, courts do not guess. They turn to established interpretive principles. Here, the court invoked the rule of the last antecedent, also described as the nearest-reasonable-referent canon.

    As articulated in cases such as Lockhart v. United States and Finisar Corp. v. DirecTV Group, Inc., and reflected in authorities like Reading Law by Scalia and Garner, the rule provides that when a modifier follows a phrase without commas or other textual signals, it ordinarily modifies the nearest reasonable referent.

    Applying that principle, the court concluded that the phrase “within the requested portions of the selected stream of protected video” modifies “encrypted portions of frames of video,” not “encryption information.”

    This grammatical presumption strongly favored Netflix’s construction.

    Intrinsic Evidence: Claims, Specification, and Prosecution History

    The Federal Circuit did not stop at grammar. It conducted the familiar Phillips v. AWH Corp. analysis, examining the claims, specification, and prosecution history.

    Claim Context

    Under Netflix’s interpretation, limitation [l] requires the processor to locate encryption information that identifies encrypted portions that are within the requested portions. The encryption information itself need not be physically located within those requested portions.

    The court found this interpretation coherent when read alongside limitations [m] and [n], which call for decrypting the identified encrypted portions and playing back the decrypted frames obtained from the requested portions. Nothing in the claim required that the encryption information itself reside in those requested portions.

    Importantly, limitation [c] requires obtaining a “top level index file.” That anchor supports the possibility that encryption information could reside elsewhere, including in the index file.

    Specification

    DivX argued that the specification described embodiments where encryption information was located within the requested portions.

    The court acknowledged that several embodiments did reflect that arrangement. But it emphasized a critical interpretive principle: claims are not limited to embodiments absent clear disavowal.

    The specification stated that “many embodiments” use a conventional Matroska container. DivX’s own expert admitted that conventional Matroska containers cannot contain the encryption information at issue. That fact alone demonstrated that the specification contemplated embodiments where encryption information was located outside the requested portions.

    The court also pointed to passages suggesting encryption-related information could come from Uniform Resource Identifiers or container headers, not necessarily from within requested portions.

    Under Pitney Bowes, Inc. v. Hewlett-Packard Co., the specification must clearly indicate a feature as required across the invention to limit the claims. That was not the case here.

    Prosecution History

    The prosecution history provided additional reinforcement. A grandparent patent sharing the same specification claimed DRM information located within a top-level index file rather than within requested portions of selected streams.

    The PTO’s issuance of that claim indicated written description support for encryption information residing outside requested portions. That further undercut DivX’s restrictive reading.

    The Holding

    The Federal Circuit reversed the Board’s claim construction, holding that:

    • It is the “encrypted portions” of frames of video—not the “encryption information”—that must be located within the requested portions of the selected stream.
    • Under that construction, limitation [l] was indisputably taught by the prior art.
    • The Board’s final written decision was vacated and remanded.

    Costs were awarded to Netflix.

    Why This Decision Matters

    This case is not about adaptive bitrate streaming. It is about disciplined claim construction.

    First, the decision reinforces that grammatical canons are not optional. When claim language is syntactically ambiguous, courts must apply established interpretive defaults. The rule of the last antecedent remains alive and powerful.

    Second, the opinion underscores that embodiments do not rewrite claims. Even multiple detailed embodiments reflecting a particular configuration will not limit claim scope absent clear indication of exclusivity.

    Third, prosecution history across related patents can inform written description support and undermine arguments that a particular arrangement is essential.

    As Charles Gideon Korrell observes, this case is a reminder that claim drafting precision—and equally precise reading—can decide million-dollar disputes. A single modifier can swing the obviousness analysis.

    Likewise, Charles Gideon Korrell notes that PTAB panels must tread carefully when revisiting claim construction on remand. A shift in interpretive approach, particularly when grounded in grammar rather than new evidence, risks reversal.

    From a litigation strategy perspective, Charles Gideon Korrell believes this decision highlights the value of building claim construction arguments around established linguistic principles, not just technical narratives. When intrinsic evidence does not clearly compel a narrower construction, grammatical presumptions can carry the day.

    Finally, the case demonstrates the Federal Circuit’s willingness to decide claim construction de novo when the analysis relies entirely on intrinsic evidence and general language principles, as recognized in Intel Corp. v. Qualcomm Inc. and SIMO Holdings Inc. v. Hong Kong uCloudlink Network Technology Ltd..

    Takeaway

    Netflix v. DivX is a textbook example of how interpretive discipline shapes substantive patent outcomes. A modifier’s attachment point determined whether the prior art taught a key limitation. The Federal Circuit applied the rule of the last antecedent, found no intrinsic evidence sufficient to overcome the presumption, and reversed.

    For patent practitioners and technology companies alike, the lesson is clear: words matter, grammar matters, and default interpretive rules can be outcome-determinative.

    By Charles Gideon Korrell

  • Apple v. Squires: Federal Circuit Holds NHK-Fintiv Is a General Statement of Policy Exempt from APA Notice-and-Comment

    Apple v. Squires: Federal Circuit Holds NHK-Fintiv Is a General Statement of Policy Exempt from APA Notice-and-Comment

    On February 13, 2026, the Federal Circuit issued its long-awaited decision in Apple Inc. v. Squires, No. 2024-1864 (Fed. Cir. Feb. 13, 2026), affirming that the USPTO Director’s NHK-Fintiv framework governing discretionary denials of IPR institution is a “general statement of policy” exempt from notice-and-comment rulemaking under 5 U.S.C. § 553(b).

    The opinion closes what many viewed as the final viable Administrative Procedure Act (APA) challenge to the NHK-Fintiv regime. In doing so, the court reinforces three themes that have defined the Federal Circuit’s post-Arthrex IPR jurisprudence: (1) the Director’s institution authority is broad and largely unreviewable; (2) policy guidance directing how that discretion is exercised is not easily transformed into a binding legislative rule; and (3) the APA’s “general statement of policy” exception remains a powerful shield for agency enforcement and non-enforcement frameworks.

    As discussed below, this decision has meaningful implications for patent challengers, patent owners, and anyone navigating the institution stage before the PTAB.

    Procedural Background: From Vidal to Squires

    The case has a long procedural arc. In 2020, Apple, Cisco, Google, and Intel challenged the USPTO’s NHK-Fintiv discretionary denial framework in the Northern District of California. The plaintiffs argued that the Director’s instructions to the Board:

    1. Contravened 35 U.S.C. ch. 31;
    2. Were arbitrary and capricious under the APA; and
    3. Required notice-and-comment rulemaking under 5 U.S.C. § 553.

    The district court initially held all three challenges unreviewable. On appeal, the Federal Circuit in Apple Inc. v. Vidal, 63 F.4th 1 (Fed. Cir. 2023), agreed that the statutory and arbitrary-and-capricious claims were unreviewable, but held that the notice-and-comment challenge was reviewable and remanded.

    On remand, the district court held that the NHK-Fintiv instructions were a “general statement of policy” exempt from notice-and-comment rulemaking. Apple appealed again. The Federal Circuit has now affirmed that conclusion.

    The Legal Question: Legislative Rule or General Statement of Policy?

    The central issue was whether the NHK-Fintiv framework constituted a “substantive” or “legislative” rule requiring notice-and-comment under 5 U.S.C. § 553—or instead a “general statement of policy” exempt under § 553(b).

    The Supreme Court has long drawn this distinction. In Chrysler Corp. v. Brown, 441 U.S. 281 (1979), the Court explained that legislative rules have the “force and effect of law,” while general policy statements merely advise the public how the agency intends to exercise its discretion. Similarly, in Lincoln v. Vigil, 508 U.S. 182 (1993), the Court emphasized that notice-and-comment requirements apply only to legislative rules.

    The Federal Circuit framed the question in familiar terms: does the agency pronouncement bind the agency itself and alter individual rights and obligations with the force of law?

    Why the Court Found NHK-Fintiv Non-Binding

    The Federal Circuit’s analysis turned on two interrelated features of the IPR statutory scheme:

    1. The Director Retains Ultimate Authority

    Under 35 U.S.C. § 314(a), the Director—not the Board—has authority to decide whether to institute IPR. Although the Director has delegated that authority to the PTAB, the Director retains the power to review or reverse Board decisions.

    Crucially, the NHK-Fintiv precedential decisions bind only the Board—not the Director. The Director can displace a Board institution or non-institution decision at any time.

    Because the challenged framework did not bind the statutory decisionmaker, it lacked the “force and effect of law” required for a legislative rule.

    The court emphasized that whether an agency pronouncement binds the agency itself is “central” to the § 553 inquiry.

    2. Institution Decisions Are Committed to Unreviewable Discretion

    The court repeatedly invoked Supreme Court precedent, including:

    These cases underscore that institution decisions are committed to the Director’s discretion and are generally unreviewable.

    The Federal Circuit reasoned that guidance concerning how the Director (or delegate) exercises unreviewable discretion is paradigmatically the kind of “general statement of policy” contemplated by § 553(b).

    As the court put it, Apple has “no right to an IPR.” A non-institution decision leaves the challenger’s legal rights unchanged—they remain free to litigate validity in district court or pursue reexamination.

    That framing proved decisive.

    Distinguishing the D.C. Circuit Cases

    Apple relied heavily on several D.C. Circuit precedents, including:

    The Federal Circuit distinguished each.

    In AFL-CIO, the challenged rules altered statutory rights relating to union elections. In General Electric, the EPA guidance facially bound both regulated entities and the agency. In Pickus, parole criteria were self-imposed binding controls subject to judicial review.

    By contrast, NHK-Fintiv:

    • Did not alter statutory rights;
    • Did not bind the Director; and
    • Concerned decisions insulated from judicial review.

    Those differences were dispositive.

    The Standing Clarification

    Apple argued that the Federal Circuit’s earlier standing holding effectively decided that NHK-Fintiv was a legislative rule.

    The court rejected that argument. Standing requires a “legally protected interest” for Article III purposes, but that does not equate to satisfying the “force and effect of law” standard under § 553.

    This clarification reinforces that APA merits inquiries remain analytically distinct from standing analyses.

    The 2025 Developments and Mootness

    During the appeal, the USPTO:

    • Rescinded the June 2022 memorandum;
    • Announced that the Director would personally make institution decisions; and
    • Issued a notice of proposed rulemaking regarding parallel litigation considerations.

    The court held the case was not moot. The Director has not rescinded NHK or Fintiv, and the proposed rule remains only a proposal.

    This aspect of the decision signals that voluntary agency modifications will not easily defeat appellate review where the underlying framework remains in place.

    Broader Implications for PTAB Practice

    The court’s reasoning has several practical implications.

    1. Internal PTAB Precedent Is Hard to Attack Procedurally

    Where the Director retains ultimate authority and discretion is unreviewable, it will be extremely difficult to characterize PTAB precedent as a legislative rule requiring notice-and-comment.

    As Charles Gideon Korrell notes, this decision effectively insulates large swaths of PTAB institution guidance from procedural APA challenges.

    2. The Force-of-Law Test Remains Central

    The opinion repeatedly returns to whether the pronouncement binds the agency itself.

    If future USPTO rulemaking results in regulations that bind the agency and limit Director discretion, the analysis could change. The October 2025 proposed rule suggests the agency may be moving in that direction.

    Charles Gideon Korrell believes that once the Director codifies a mandatory institution rule applicable to the PTO itself, a stronger case for legislative-rule treatment would arise.

    3. Institution Discretion Is Constitutionally Anchored

    The court’s reasoning is tightly interwoven with Arthrex. Because Arthrex requires Director control over institution decisions, guidance that preserves that control is structurally aligned with the Constitution.

    This reinforces the post-Arthrex understanding that institution is an executive function, not a quasi-judicial entitlement.

    4. The Limits of APA Review in Patent Law

    The Federal Circuit continues to narrow the channels for APA-based challenges to IPR institution policy. Substantive challenges were foreclosed in 2023; procedural challenges are now rejected on the merits.

    As Charles Gideon Korrell has observed in prior commentary, the combined effect of § 314(d), Cuozzo, Thryv, and now Squires leaves challengers with little recourse outside constitutional claims.

    Strategic Takeaways

    For petitioners:

    • Discretionary denial remains a policy-driven inquiry.
    • Arguments should focus on persuading the Director or Board under existing factors rather than expecting judicial review to rescue a denied petition.
    • Monitoring final rulemaking developments will be critical.

    For patent owners:

    • The decision solidifies the legitimacy of discretionary-denial arguments based on parallel litigation.
    • The institution stage remains a key battleground for shaping the overall litigation trajectory.

    For practitioners generally:

    • Internal agency precedent can often qualify as a general statement of policy even when it has significant practical consequences.
    • The binding effect on the agency—not just impact on parties—is the decisive consideration.

    Conclusion

    In Apple Inc. v. Squires, the Federal Circuit has firmly held that the NHK-Fintiv framework is a general statement of policy exempt from notice-and-comment rulemaking. 24-1864.OPINION.2-13-2026_26477…

    The opinion reinforces the Director’s broad, largely insulated authority at the IPR institution stage and narrows the procedural avenues for challenging PTAB discretionary-denial policies.

    The decision does not eliminate debate about the wisdom of NHK-Fintiv. But it decisively resolves, at least for now, the question of whether that framework required APA rulemaking procedures.

    The Director remains unbound—and so, it appears, does NHK-Fintiv.

    By Charles Gideon Korrell