The Federal Circuit Court of Appeals continues to strike down patents directed to abstract ideas under the Alice test for patent subject matter eligibility. In People.ai, Inc. v. Clari Inc. (Fed. Cir. 2023) U.S. App. LEXIS 8294, the court invalidated seven patents owned by People.ai.
A patent protects an invention. To be patentable, an invention must fall within one of four categories of patentable (or patent-eligible) subject matter: articles of manufacture, machines, processes, and compositions of matter. These categories are listed in 35 U.S.C. §101. Things that are not patentable (by judicial exceptions) include laws of nature, natural phenomena, and abstract ideas. These nonpatentable things are referred to as patent-ineligible subject matter.
In 2014, the Supreme Court established a two-part test to determine whether an invention is patent-eligible. Alice Corp. Pty. Ltd. v. CLS Bank International, 573 U.S. 208, 216, 219 (2014). The first step is a determination of whether the claimed invention falls within one of the categories of patent-ineligible subject matter. If it does, then the second step is a determination of whether the claimed invention has an inventive concept that transforms the patent-ineligible subject matter into something patentable.
Since Alice was decided, the Alice test has been used many times by the PTO to reject claims during an examination of patent applications and by the federal district courts to invalidate patents on the grounds that the claims are directed to the patent-ineligible subject matter. People.ai’s patents are some of the latest casualties.
People.ai provides business analytics software for customer relations management systems and other business systems. People.ai’s patents were directed to the use of tailored filtering to obtain information from emails, meetings, and telephone calls and match the information to the customers’ accounts. Before the development of the patented systems, the data in customer relations management systems had to be updated manually. The manual data entry process was subject to errors. By automating the data entry, the patented systems were more accurate than the manual systems.
People.ai sued Clary, Inc. and SetSail Technologies, Inc. in the Northern District of California for infringement of seven of people.ai’s patents. The defendants were competitors of people.ai. The defendants moved for judgment on the pleadings, contending that the patents were invalid.
The district court granted the motion, applying the two-step Alice test. The court found that the patents were directed to an abstract idea and lacked an inventive concept and were, therefore, ineligible subject matter. In the first step, the court found that the claims covered “ the activities of a prototypical corporate salesperson,” including matching emails to contacts and updating the records. The court said that the claims did not do anything other than “recite a common commercial practice long performed by humans.” In the second step, the court did not find any inventive concept.
People.ai appealed to three of the patents. The appellate court agreed with the district court’s rationale and affirmed its decision. The court noted that, under Alice, “fundamental practices long prevalent in our system of commerce are abstract ideas.” The court reiterated that using a computer to automate a formerly manual process does not result in patentable subject matter.
The court held that the first step of the Alice test was met because the claims of People.ai’s patents covered methods of automating manual processes. As such, the claims were directed to an abstract idea. The court explained that a method for automating a manual process might not be an abstract idea if the automated process is different from the manual process and “provides a specific means or method that improves the relevant technology.”
As to the second step of the Alice test, the court held that the claims did not have an inventive concept. Thus, the court held that all of the patents were invalid.
In summarizing its conclusion as to one of the patents, the court stated: “it is undisputed that the computer components recited by the asserted claims of the patent …. are generic. And the method being performed on those generic components matches the manual process conventionally performed by a salesperson, i.e. the abstract idea itself….” The conclusion cannot be emphasized enough: using a computer to perform a process people did without a computer is not patentable.