Nearest Referent, Nearest Resolution: Federal Circuit Clarifies Encryption Claim Language

In Netflix, Inc. v. DivX, LLC, No. 24-1541 (Fed. Cir. Feb. 13, 2026), the Federal Circuit reversed the Patent Trial and Appeal Board’s claim construction, vacated its final written decision, and remanded for further proceedings.

Netflix petitioned for an inter partes review of DivX’s patent, asserting obviousness over a combination of prior art. The dispute centered on the construction of a claim limitation that required “locating encryption information that identifies encrypted portions of frames of video within the requested portions of the selected stream.” Over the dissent of one administrative law judge, the Board construed the limitation to require that the encryption information itself be located within the requested portions and concluded that Netflix had failed to show that the limitation was met by the prior art. Netflix appealed.

The Federal Circuit reversed, holding that the phrase “within the requested portions” modifies “encrypted portions of frames of video,” not “encryption information.” To reach this conclusion, the Court applied the “nearest reasonable referent” canon of grammatical construction, in which a modifier is presumptively understood to be tied to the nearest available semantically plausible modificand where commas or other textual signals are not used. The Court found this reading confirmed by the claim structure, specification embodiments, and the prosecution history of a related grandparent patent. Under the correct construction, the asserted prior art indisputably taught the disputed limitation, warranting remand for further proceedings.