IP Law Daily, PATENT—Fed. Cir.: Business-analytics software patents were invalid for lacking an inventive concept, (Apr 7, 2023)

By Robert B. Barnett Jr., J.D.

The Federal Circuit agreed with the district court that the patent claims merely automated what humans had done previously, without developing anything new other than the automation, making them ineligible under Section 101.

In a patent suit brought by People.ai, Inc., involving business-analytics software, the U.S. Court of Appeals for the Federal Circuit Court has affirmed a California district court’s grant of judgment on the pleadings to the defendants Clari Inc. and SetSail Technologies because People.ai’s patents were invalid as directed to an abstract idea and lacking an inventive concept. Automation of a process previously handled by humans is an abstract idea that is patent-ineligible. Furthermore, having the computer perform steps in exactly the same order that a human once performed them is not an inventive concept. Thus, the asserted patents were invalid because they failed both steps of the Supreme Court’s Alice/Mayo test (People.ai, Inc. v. Setsail Technologies, Inc., April 7, 2023, Cunningham, T.).

Patents-in-suit. People.ai, Inc., offers business-analytics software to help customers optimize their customer relationship management systems. People.ai has patents on its approach for adding “systems of record,” which encompass a variety of business processes. People.ai’s software is designed to allow customers to input data automatically that had once been entered manually by employees.

Infringement dispute. People.ai sued Setsail Technologies, Inc. and Clari Inc., in California federal court, asserting they violated seven patents. The district court granted judgment on the pleadings to Setsail and Clari, ruling that People.ai’s patents were invalid. People.ai appealed the decision, but only as to three of the seven patents.

Patent invalidity. The U.S. Supreme Court has established a two-step test for determining whether patent claims fall within one of the judicial exceptions to 35 U.S.C. §101, for laws of nature, natural phenomena, and abstract ideas, which the courts have said are not patentable (Alice Corp. Pty. Ltd. v. CLS Bank Int’l Ltd., 573 U.S. 208, 216 (2014); Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66, 77-78 (2012). Step one involves an analysis of whether the claims are directed to a patent-ineligible concept, such as an abstract idea. If so, step two looks to see if the claim involves an inventive concept that transforms the abstract idea into a patent-eligible application.

Abstract idea. The appeals court then examined the three patents to see if they survived the Alice/Mayo test. Under step one for the two claims under the first patent, which involved data processing, the appeals court concluded that they involved an abstract idea because, as has been long recognized, automation of conventional human methods of organizing data does not remove a claim from “the realm of abstractness.” This patent, the appeals court noted, is directed at replacing an already existing manual process of updating systems of record with an automated process. While this replacement might create improvements in speed and efficiency, it is not patent-eligible. Similar claims in the past have been regularly rejected.

The appeals pointed out that an automated process can be removed from the abstract realm if the automated process differs from the manual process by providing a specific method to improve on the current technology. The appeals court ruled, however, that the steps set forth in this first patent “do not differ from those previously used in the long-prevalent manual practice of selecting certain communications for further processing.” Computer functionality was not improved, for example, which was present in other cases where the court has found the concept patent-eligible.

The claims ultimately failed, the court ruled, because the process “is merely a computerized version of a rolodex entry or file corresponding to an individual, such as a specific customer, in a filing cabinet.” Thus, the claims are directed to the abstract idea of “data processing by restricting certain data from further analysis based on various sets of generic rules.” This, the appeals court noted, “is a longstanding process,” and automation of it was not patent eligible. This first patent, therefore, failed step one of the Alice/Mayo test because it involved an abstract idea.

Inventive concept. Turning to step two, the appeals court found no inventive concept to rescue the patent from its failure at step one. The abstract idea itself cannot supply the inventive concept; something else must exist. The features set forth in the patent, the Federal Circuit concluded, were “generic computer features.” As such, they were not inventive. The appeals court rejected People.ai’s contention that an inventive concept was found in its ordered combination of steps to extract data because those steps “are exactly the same steps that a salesperson would have traditionally undertaken to filter and sort his or her correspondence by hand.” As a result, the patent also failed step two of the Alice/Mayo test because no inventive concept existed.

Other patents. Turning to the other two patents, the appeals court reached the same result and for the same reasons. Both patents failed both steps of the Alice/Mayo test. One patent claim employs a filtering policy, and the other recites a method for constructing and maintaining a node graphic on data extracted from communication activities. Both were found to express an abstract idea without involving an inventive concept. Node profiles, the appeals court said once again, “are merely an electronic rolodex or an electronic filing cabinet used to store business correspondence and records with files for each customer.”

The case is No. 2022-1364.

Attorneys: Edward R. Reines (Weil, Gotshal & Manges LLP) for People.ai, Inc. David Shane Brun (King & Spalding LLP) for SetSail Technologies, Inc. Daralyn Jeannine Durie (Morrison & Foerster LLP) for Clari Inc.

Companies: People.ai, Inc.; SetSail Technologies, Inc.

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