“Down the Rabbit Hole” Again With Alice Two-Step: Federal Circuit Affirms Another PTAB Patent-Ineligibility Decision

As previously reported on March 17, 2021, the Federal Circuit affirmed the Patent Trial and Appeal Board (PTAB) decision that the rejected claims of a patent application owned by The Board of Trustees of Leland Stanford University (Stanford), “are drawn to abstract mathematical calculations and statistical modeling, and similar subject matter,” and thus are patent-ineligible subject matter under 35 U.S.C. § 101.1   On March 25, 2021, in a second case “consolidated for purposes of oral argument,” the Federal Circuit affirmed PTAB’s decision finding the rejected claims of another Stanford patent application patent-ineligible subject matter.2 

The Written Description, Examiner’s Rejections and PTAB Affirmation

In June 2012, Stanford filed Patent Application No. 13/486,982 (‘982 Application), “directed to computerized statistical methods for determining haplotype phase. A haplotype phase acts as an indication of the parent from whom a gene has been inherited.  Haplotype phasing is a process for determining the parent from whom alleles—i.e., versions of a gene—are inherited.”3 

The ‘982 Application discloses “that accurately estimating haplotype phase based on genotype data obtained through sequencing an individual’s genome ‘plays pivotal roles in population and medical genetic studies’” and “although high-throughput DNA sequencing methods provide genotype data for individuals, those [prior art] methods do not provide haplotype information.”4   The specification further “discloses an embodiment in which a statistical model called PHASE-EM is used to predict haplotype phase,” which is “a modified version of the preexisting PHASE model and operates more efficiently and accurately than the PHASE model” which uses “‘a parameterization [expectation maximization] algorithm’ in predicting haplotype phase.”5   According to the specification, PHASE-EM “perform[s] optimization on haplotypes rather than MCMC [Markov chain Monte Carlo] sampling,” known in the prior art as PHASE model, and “the computational intensiveness of MCMC sampling makes it difficult to use PHASE to analyze large datasets like those generated in genome-wide association studies.”6 

The examiner rejected the claims of the ‘982 Application “on grounds that the claims cover patent ineligible abstract mathematical algorithms and mental processes” and the PTAB “affirmed the final rejection of the claims.”7  Stanford appealed the examiner’s final rejection of the claims of the ‘982 Application, which were affirmed by the PTAB.8   Stanford subsequently appealed the PTAB’s decision to the Federal Circuit.

Alice Two-Step Analysis and Federal Circuit Affirmation

“In its analysis of the examiner’s rejections,” the PTAB “applied the two-step [Alice] framework established by the Supreme Court for determining patent eligibility.”9  Applying “step one of the Alice inquiry,” the PTAB “determined that representative claim 1 is directed to patent ineligible abstract ideas in the form of mathematical concepts, i.e., mathematical relationship, formulas, equations, and calculations.”10  The PTAB “explained, claim 1 recites an initial step of receiving genotype data, followed by the mathematical operations of building a data structure describing an HMM and randomly modifying at least one imputed haplotype to automatically recompute the HMM’s parameters.”11

In concluding “claim 1 recites abstract ideas,” the PTAB “determined that claim 1 recites two abstract mental processes:” first, “the step of ‘imputing an initial haplotype phase for each individual in the plurality of individuals based on a statistical model;’” and second, “the step of automatically replacing an imputed haplotype phase with a randomly modified haplotype phase when the latter is more likely correct than the former.”12  The PTAB “noted that the additional elements in claim 1 recited generic steps of receiving and storing genotype data in a computer memory, extracting the predicted haplotype phase from the data structure, and storing it in a computer memory.”13

Stanford argued “application of the steps in claim 1 results in improved computer functionality” and “improvements to computer implemented fields are considered technological improvements,”14 citing Enfish, LLC v. Microsoft Corp.15 and McRO, Inc. v. Bandai Namco Games America Inc.,16 respectively.  Distinguishing Enfish and McRO, the PTAB determined “that Stanford failed to identify any specific disclosures in the specification asserting that claim 1 results in improved computer functionality” and “that the claimed process there used ‘a combined order of specific rules that renders information into a specific format that is then used and applied to create desired results: a sequence of synchronized, animated characters.’”17  

Applying “step two of the Alice inquiry,” the PTAB “reviewed whether claim 1 included additional limitations that, when taken individually or in combination, provided an inventive concept that transformed the abstract idea into patent eligible subject matter,” and determined “the claim 1 steps of receiving, storing, and extracting data were well-known, routine, and conventional,” rejecting Stanford’s arguments.18  The PTAB applied the same analysis to the other rejected claims.19

Stanford argued among other things, that “the alleged increase in haplotype prediction accuracy renders claim 1 a practical application rather than an abstract idea.”20  However, after distilling claim 1 into a five-step process of “building a data structure describing an [HMM],” “repeatedly randomly modifying at least one of the imputed initial haplotype phases,”21 “receiving genotype data, imputing an initial haplotype phase, extracting the final predicted haplotype phase from the data structure, and storing it in a computer memory,” the Federal Circuit affirmed that the PTAB correctly found the claims patent-ineligible because the “generic steps of implementing and processing calculations with a regular computer do not change the character of claim 1 from an abstract idea into a practical application.”22

Finding no legal error in the PTAB's determinations regarding step one of the Alice inquiry because “[t]he different use of a mathematical calculation, even one that yields different or better results, does not render patent eligible subject matter,” the Court then turned to Alice step two.23  Again, the Court found no legal error in the PTAB's determinations regarding step two of the Alice inquiry; “claim 1 is not saved” because there is “no inventive concept that would warrant treating the use of the claimed algorithms and mathematical calculations as patent eligible subject matter;” rather, “the recited steps of receiving, extracting, and storing data amount to well-known, routine, and conventional steps taken when executing a mathematical algorithm on a regular computer.”24  The court upped the ante, confirming patent ineligibility because claim 1 does not “require or result in a specialized computer or a computer with a specialized memory or processor. Indeed, it is hard to imagine a patent claim that recites hardware limitations in more generic terms than the terms employed by claim 1.”25  

The Court, however, determined that “claim 1 simply appends the abstract calculations to the well-understood, routine, and conventional steps of receiving and storing data in a computer memory and extracting a predicted haplotype,” and “application of those elements results in the mathematical analysis itself, and therefore the claimed method subsists in ‘the basic tools of scientific and technological work.’”26  The Court found “[t]he remaining claims contain no limitations, considered individually or as an ordered combination, that transform the abstract idea into a patent eligible application.”27 

Through The Looking Glass

Once again, this decision is not surprising given the data processing/bioinformatics context, it is just another curious example in a string of cases since Alice that have foreclosed protection entirely for certain important inventions in the diagnostics, biopharmaceutical, and life sciences industries.  It befuddles us as to how the Court can state there is no “technological improvements extending beyond improving the accuracy of a mathematically calculated statistical prediction.”28  If Claim 1 of the ‘982 Application simply substituted an HMM with a Recurrent Neural Networks (RNNs) (which is generally better on larger data sets such as the genotype data in Claim 1) in very generic terms, then perhaps there is not much of a technical improvement beyond improving the accuracy of a mathematically calculated statistical prediction.  That, however, is not the case in the ‘982 Application. 

The ‘982 Application provides a technological improvement in the field of probabilistic graphical models that allows Stanford to predict a sequence of unknown (hidden) variables from a “large” set of observed variables (i.e., the genotype data from a plurality of individuals) using an improved HMM modeling technique.  The improved HMM modeling technique includes building the HMM model to include the imputed haplotypes as the hidden states, randomly modifying at least one imputed haplotype by re-computing both local recombination rates and mutation rates upon observing any change to the set of imputed haplotype phases within the HMM model, and automatically replacing the imputed haplotype phase for an individual with the randomly modified haplotype phase within the HMM model, when the re-computed local recombination rates and mutation rates indicate that the randomly modified haplotype phase is more likely than an existing imputed haplotype phase.  This improvement in the field of probabilistic graphical models allows for a HMM model to now take as input large data sets and infer a haplotype phase for an individual from the large data sets while improving upon error rate.  How is this not a technological improvement extending beyond improving the accuracy of the prediction itself, which has a practical clinical application (allowing for high-throughput DNA sequencing methods to provide haplotype information, which can be ultimately used in a clinical setting to determine the parent from whom an allele is inherited)?  In our opinion, and contrary to the Courts opinion, this is very similar to Enfish which discusses patent eligible claims directed to “an innovative logical model for a computer database” that included a self-referential table allowing for greater flexibility in configuring databases, faster searching, and more effective storage29; whereas in the ‘982 Application there are patent eligible claims directed to an innovative logical algorithm for a probabilistic graphical model that include the imputed haplotypes as the hidden states allowing for greater flexibility in configuring the model to handle larger data sets while improving upon error rate.

Due to the significance of the patent eligibility question and the lack of clarity in the current jurisprudence, we anticipate Stanford will petition the U.S. Supreme Court to hear this case, potentially requesting consolidation with the March 11, 2021 Federal Circuit decision which also affirmed a PTAB determination that a Stanford patent application was patent ineligible.  As set forth in our previous posts on March 12, 2021, March 17, 2021, and March 26, 2021, clarification and/or reform of patent eligibility is a hot topic for IP stakeholders in 2021.  In the end, will patent eligibility requirements be addressed at the agency level, through legislative action to reform patent eligibility requirements or will the Supreme Court take up the issue? Perhaps 2021 will provide an answer.  Please, contact the authors with any questions, and stay tuned for updates regarding this important topic.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


1In re Bd. of Trs. of the Leland Stanford Junior Univ., 989 F.3d 1367, at *1 (Fed. Cir. 2021).
2In re Bd. of Trs. of the Leland Stanford Junior Univ., No. 2020-1288, 2021 WL 1133865, __ F.3d __, at *1 (Fed. Cir. Mar. 25, 2021).
7Id. at *2.
8Id. at *1.
9Id. at *2 (citing Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208 (2014)).
10Id. at *2.
12Id. at *2-3.
13Id. at *3.
15822 F.3d 1327 (Fed. Cir. 2016).
16837 F.3d 1299 (Fed. Cir. 2016).
172021 WL 1133865, at *3.
18Id. at *3.
20Id. at *5.
21Id. at *2.
22Id. at *4.  The Court held that Stanford “forfeited its argument that greater computational efficiency renders claim 1 patent eligible” because it failed to raise the issue before the PTAB. Id. at *5.
23Id. at *5.
25Id. at *6.
28Id. at *5.
29Id. at *5 (quoting Enfish, 822 F.3d at 1330).

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