FULL PRODUCT VERSION :
java version "1.8.0_121"
Java(TM) SE Runtime Environment (build 1.8.0_121-b13)
Java HotSpot(TM) Client VM (build 25.121-b13, mixed mode, sharing)


ADDITIONAL OS VERSION INFORMATION :
Microsoft Windows [Version 10.0.10240]


EXTRA RELEVANT SYSTEM CONFIGURATION :
Firefox 51.0.1 (32-bit) as default browser, with "Manual proxy configuration" set to use a particular proxy server (details below) for HTTP, SSL and FTP proxies.

Java network settings are "Use browser settings".

The proxy server is squid-3.3.9 running on a different machine, configured to require Basic authentication.

A DESCRIPTION OF THE PROBLEM :
The application won't launch.

The pertinent feature of the application seems to be that the codebase in the jnlp file has an https URL. There are examples of such applications accessible from http://docs.oracle.com/javase/tutorial/uiswing/examples/misc/index.html - eg. the codebase for https://docs.oracle.com/javase/tutorialJWS/samples/uiswing/AccessibleScrollDemoProject/AccessibleScrollDemo.jnlp is https://docs.oracle.com/javase/tutorialJWS/samples/uiswing/AccessibleScrollDemoProject

STEPS TO FOLLOW TO REPRODUCE THE PROBLEM :
(1) In Firefox, go to http://docs.oracle.com/javase/tutorial/uiswing/examples/misc/index.html. At some point, possibly prior to this, Firefox will have prompted for authentication details for the proxy - supply them when asked.

(2) Click the "Launch" link for AccessibleScrollDemo

(3) When asked how to open AccessibleScrollDemo.jnlp, choose to open with "Java(TM) Web Start Launcher (default)" and click OK


EXPECTED VERSUS ACTUAL BEHAVIOR :
EXPECTED -
To be prompted for authentication details for the proxy, and then for the application to launch.

ACTUAL -
An Application Error dialog box is displayed saying "Unable to launch the application".

ERROR MESSAGES/STACK TRACES THAT OCCUR :
java.io.IOException: Unable to tunnel through proxy. Proxy returns "HTTP/1.1 407 Proxy Authentication Required"
at sun.net.www.protocol.http.HttpURLConnection.doTunneling(Unknown Source)
at sun.net.www.protocol.https.AbstractDelegateHttpsURLConnection.connect(Unknown Source)
at sun.net.www.protocol.http.HttpURLConnection.getInputStream0(Unknown Source)
at sun.net.www.protocol.http.HttpURLConnection.access$200(Unknown Source)
at sun.net.www.protocol.http.HttpURLConnection$9.run(Unknown Source)
at sun.net.www.protocol.http.HttpURLConnection$9.run(Unknown Source)
at java.security.AccessController.doPrivileged(Native Method)
at java.security.AccessController.doPrivilegedWithCombiner(Unknown Source)
at sun.net.www.protocol.http.HttpURLConnection.getInputStream(Unknown Source)
at sun.net.www.protocol.https.HttpsURLConnectionImpl.getInputStream(Unknown Source)
at com.sun.deploy.net.HttpUtils.followRedirects(Unknown Source)
at com.sun.deploy.net.BasicHttpRequest.doRequest(Unknown Source)
at com.sun.deploy.net.BasicHttpRequest.doGetRequestEX(Unknown Source)
at com.sun.deploy.cache.ResourceProviderImpl.checkUpdateAvailable(Unknown Source)
at com.sun.deploy.cache.ResourceProviderImpl.isUpdateAvailable(Unknown Source)
at com.sun.deploy.cache.ResourceProviderImpl.getResource(Unknown Source)
at com.sun.deploy.cache.ResourceProviderImpl.getResource(Unknown Source)
at com.sun.javaws.Launcher.updateFinalLaunchDesc(Unknown Source)
at com.sun.javaws.Launcher.prepareToLaunch(Unknown Source)
at com.sun.javaws.Launcher.prepareToLaunch(Unknown Source)
at com.sun.javaws.Launcher.launch(Unknown Source)
at com.sun.javaws.Main.launchApp(Unknown Source)
at com.sun.javaws.Main.continueInSecureThread(Unknown Source)
at com.sun.javaws.Main.access$000(Unknown Source)
at com.sun.javaws.Main$1.run(Unknown Source)
at java.lang.Thread.run(Unknown Source)


REPRODUCIBILITY :
This bug can be reproduced always.

CUSTOMER SUBMITTED WORKAROUND :
In the Java network settings, choose "Use proxy server" to explicitly set the proxy.

If I do this, then I am prompted for authentication details prior to the application starting, which is as I would expect.