system configuration 
==================== 
JRE 7u51 and above, windows 7, IE 

Submitter states that this is seen as a regression since 7u51. I haven't reproduced internally yet.

Simple javaws testcase in their environement which calls : 

System.out.println("Trying to connect to: " + lServer + ":" + lPort); 
InetSocketAddress lAddress = new InetSocketAddress(lServer, lPort); 
lSocket = new Socket(); 

lSocket.connect(lAddress, 500); 

and throws java.net.SocketException: Unknown proxy type : HTTP

Possible that this is related to JDK-7178362