People.ai, Inc. v. Clari Inc. ( 2021 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 9 10 PEOPLE.AI, INC., No. C 20-09148 WHA 11 Plaintiff, No. C 21-06314 WHA 12 v. 13 SETSAIL TECHNOLOGIES, INC., ORDER RE JUDGMENT ON THE 14 Defendant. PLEADINGS 15 PEOPLE.AI, INC., 16 Plaintiff, 17 v. 18 CLARI INC., 19 Defendant. 20 21 INTRODUCTION 22 In two actions, patent owner has asserted seven total patents against two alleged 23 infringers. Because all seven patents contain the fundamental “do it on a computer” flaw, all 24 seven patents are invalid as ineligible subject matter under Section 101. To the foregoing 25 extent, defendants’ motions for judgment on the pleadings are GRANTED. 26 STATEMENT 27 Patent owner People.ai, Inc. offers business-analytics software that optimize customer 1 business’s relationships and interactions with customers in order to streamline sales and other 2 opportunities. The more data input into the system — and the more accurate that data are — 3 the more helpful the CRM. Both defendants SetSail Technologies, Inc. and Clari Inc. compete 4 in the same burgeoning market as People.ai. 5 People.ai filed suit against SetSail for patent infringement in December 2020. In 6 February 2021, SetSail moved to dismiss under Rule 12(b)(6), prompting People.ai to amend. 7 SetSail again moved to dismiss the first amended complaint, which a June 2021 order granted. 8 During the pendency of People.ai’s motion for leave to file a second amended complaint, the 9 Court of Appeals for the Federal Circuit clarified patent pleading requirements. An order 10 dated August 23, 2021, thus found the most prudent course forward was to permit People.ai’s 11 further amendment. The second amended complaint accuses SetSail of infringing U.S. Patent 12 Nos. 10,496,634; 10,565,229; and 10,657,129. The order granting leave to amend also 13 scheduled a “patent showdown” procedure. But SetSail has skipped over that procedure and 14 argues here that all three patents are ineligible under Section 101 (SetSail Dkt. Nos. 58, 71, 15 74). 16 People.ai filed suit against Clari in March 2021 in the United States District Court of the 17 District of Delaware. In July 2021, the action was transferred to our district and reassigned to 18 the undersigned in light of the asserted patents overlapping with the SetSail action. The first 19 amended complaint alleges that Clari infringes U.S. Patent Nos. 10,496,634; 10,565,229; and 20 10,657,129 (all three of which are also asserted against SetSail); as well U.S. Patent Nos. 21 10,503,783; 10,657,132; 10,872,106; and 10,922,345. Clari quickly moved for judgment on 22 the pleadings on the grounds that all seven patents are ineligible under Section 101 (Clari Dkt. 23 Nos. 21, 33, 53). 24 Six of the seven asserted patents, the ’129, ’106, ’229, ’783, ’634, and ’132 patents, all 25 issued from the same bloc of three provisional applications — Provisional Application Nos. 26 62/676,187, 62/725,999, and 62/747,452. The ’345 patent issued from the latter two 27 provisional applications. Accordingly, because the closely related patents asserted against the 1 defendants in these actions overlap and defendants’ arguments that the patents are ineligible 2 are substantially similar, this order will jointly address defendants’ motions. 3 ANALYSIS 4 1. THE LEGAL STANDARD. 5 Judgment on the pleadings pursuant to Rule 12(c) is proper when the moving party 6 establishes “on the face of the pleadings that no material issue of fact remains to be resolved 7 and that it is entitled to judgment as a matter of law.” Hal Roach Studios, Inc. v. Richard 8 Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989). Analysis under Rule 12(c) is 9 “substantially identical” to analysis under Rule 12(b)(6). Chavez v. United States, 683 F.3d 10 1102, 1108 (9th Cir. 2012). District courts must accept all plausible factual allegations in the 11 light most favorable to the non-moving party, but need not “accept as true allegations that are 12 merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Sprewell v. 13 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Patent eligibility can be determined 14 on the pleadings when there are no factual allegations that, taken as true, prevent resolving the 15 eligibility question as a matter of law. Similar to factual allegations, a district court adopts the 16 non-moving party’s claim constructions, and need not engage in a full, formal Markman 17 hearing. Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1124–25 (Fed. 18 Cir. 2018); Data Engine Techs. LLC v. Google LLC, 906 F.3d 999, 1007 (Fed. Cir. 2018). 19 Section 101 provides that whoever “invents or discovers any new and useful process, 20 machine, manufacture, or composition of matter, or any new and useful improvement thereof, 21 may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 22 U.S.C. § 101. The implicit exception to Section 101 is that laws of nature, natural phenomena, 23 and abstract ideas are not patentable. Section 101 thus addresses the preemption concerns 24 underlying patent law. In Alice, the Supreme Court fashioned our now-familiar two-step 25 inquiry for Section 101. The district court first evaluates whether the patent claim is directed 26 to an abstract idea. If so, we consider at step two whether the claimed elements recite an 27 inventive concept that transforms the otherwise abstract idea into a patent-eligible invention. 1 Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208, 217–18, 221, 223 (2014); Mayo Collab. 2 Servs. v. Prometheus Labs, Inc., 566 U.S. 66, 70 (2012). 3 In more detail, for Alice step one, the Court of Appeals for the Federal Circuit has 4 explained that the district court should consider whether the claims “focus on a specific means 5 or method that improves the relevant technology,” or are instead “directed to a result or effect 6 that itself is the abstract idea and merely invoke generic processes and machinery.” Apple, Inc. 7 v. Ameranth, Inc., 842 F.3d 1229, 1241 (Fed. Cir. 2016); see also McRO, Inc. v. Bandai Namco 8 Games Am. Inc., 837 F.3d 1299, 1314 (Fed. Cir. 2016). For software to be patent eligible, it 9 must go beyond merely organizing existing information into a new form, carrying out a 10 longstanding commercial practice, or otherwise reciting a long prevalent, fundamental practice 11 now accomplished with the benefit of a computer. See Return Mail, Inc. v. U.S. Postal Serv., 12 868 F.3d 1350, 1368 (Fed. Cir. 2017), reversed and remanded on other grounds, 139 S. Ct. 13 1853 (2019); Intellectual Ventures I LLC v. Capital One Financial Corp. (Capital One), 850 14 F.3d 1332, 1340–41 (Fed. Cir. 2017); Intellectual Ventures I LLC v. Symantec Corp. 15 (Symantec), 838 F.3d 1307, 1313–14 (Fed. Cir. 2016). For actions “involving computer- 16 related claims, there may be close calls about how to characterize what the claims are directed 17 to. In such cases, an analysis of whether there are arguably concrete improvements in the 18 recited computer technology could take place under step two.” Enfish, LLC v. Microsoft 19 Corp., 822 F.3d 1327, 1339 (Fed. Cir. 2016). 20 At Alice step two, we ask what else is there in the claim. The second part of the Alice 21 inquiry searches for an inventive concept in an element or combination of elements that is 22 sufficient to ensure that the patent claim, in practice, amounts to significantly more than a 23 patent upon the ineligible abstract concept itself. The recitation of generic computer hardware 24 or generic software structures does not transform an abstract idea into a patent-eligible 25 invention. A patent claim must do more than merely state an abstract idea and say “apply it” 26 or “apply it with a computer.” A non-conventional arrangement of conventional components 27 can, however, give rise to an inventive concept. Alice, 573 U.S. at 217–18, 221–23; Symantec, 1 Mobility LLC, 827 F.3d 1341, 1349–50 (Fed. Cir. 2016). A district court may not rely on 2 “technological details set forth in the patent’s specification and not set forth in the claims to 3 find an inventive concept.” Symantec, 838 F.3d at 1322. While the specification can 4 illuminate the true focus of a claim, unclaimed features are irrelevant to the Alice analysis. 5 ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759, 766, 769 (Fed. Cir. 2019), cert. 6 denied, 140 S. Ct. 983, (2020); Am. Axle & Mfg., Inc. v. Neapco Holdings LLC, 967 F.3d 1285, 7 1293 (Fed. Cir. 2020). 8 Procedurally, it is not necessary for a district court to address each claim of the patents- 9 in-suit. The Alice analysis may instead focus on representative claims. The parties may agree 10 as to which claims qualify as representative or the district court may select representative 11 claims where the other claims recited in the patent are substantially similar and linked to the 12 same abstract idea, and the patentee does not present any meaningful argument for the 13 distinctive significance of any claim limitations not found in the representative claim. See 14 Berkheimer v. HP Inc., 881 F.3d 1360, 1365 (Fed. Cir. 2018); Content Extraction & 15 Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, 776 F.3d 1343, 1348 (Fed. Cir. 2014). 16 Upon review, this order finds the claims that People.ai discussed in its claim charts and which 17 the parties focused on in their briefing rank as representative, but considers each of the other 18 claims that People.ai specifically addressed in its briefing and in the hearing. 19 This order proceeds to address each patent in turn. 20 2. THE ’129 PATENT (ASSERTED AGAINST SETSAIL AND CLARI). 21 First up is the ’129 patent, entitled “Systems and Methods for Matching Electronic 22 Activities to Record Objects of Systems of Record with Node Profiles.” Per Alice step one, 23 defendants contend representative claim 20 is directed to a patent-ineligible abstract concept. 24 People.ai replies that the claim is patent eligible because “it is directed to the automatic use of 25 rules of a particular type, and [defendants have] not provided evidence that the claimed process 26 is the same process previously used” (Opp. I at 14, Clari Dkt. No. 58; see also Opp. II at 18, 27 SetSail Dkt. No. 100). 1 Stripped of excess verbiage, claim 20 discloses a system with “one or more processors” 2 configured to: maintain node profiles; access electronic activities; maintain record objects; 3 “extract data” from the electronic activities; “match the electronic activity to at least one node 4 profile”; “match the electronic activity to at least one record object”; and “store, in a data 5 structure, an association between the electronic activity and the at least one record object.” To 6 match the electronic activity with a record object, the one or more processors are configured to 7 apply a matching policy “based on one or more recipients of the electronic activity and a 8 sender of the electronic activity” (emphasis added). 9 Translating the jargon, the claim consists of generic software objects. “Node profiles” 10 are data profiles that store information on various entities, such as a person’s name and email 11 address (e.g., ’129 patent, col. 2:1–3, fig. 6B; SetSail Dkt. No. 46 at 16). “Record objects” are 12 another type of data profile that store information on various opportunities and accounts (’129 13 patent, cols. 68:5–16, 68:23–67). A prototypical “electronic activity” is an email or phone call 14 (id. at col. 22:23–28). And “systems of record” are CRM platforms like Salesforce (id. at col. 15 1:18–37; Opp. I at 1). 16 The claimed system thus matches an electronic activity like an email to an opportunity 17 profile and a business profile by determining that the sender and recipients of the email match 18 information contained in the profiles. People.ai’s own summary aligns: “The claims . . . 19 include specific limitations that define how the matching is carried out. It is carried out by 20 comparing object filed values of a record object to extracted data, and the object field values 21 correspond to senders and recipients of the electronic activity” (Opp. II at 3, emphasis added). 22 Recognizing a claim must not be described at too high a level of abstraction, this order finds 23 claim 20 directed to an abstract idea analogous to “1) collecting data, 2) recognizing certain 24 data within the collected data set, and 3) storing that recognized data in a memory.” Content 25 Extraction, 776 F.3d at 1347; see also Return Mail, 868 F.3d at 1368; Enfish, 822 F.3d at 1337. 26 This order finds the asserted claims of the ’129 patent parallel the activities of a 27 prototypical corporate salesperson, similar to the corporate mailroom analogy in Symantec. 1 correspondence related to business opportunities; the salesperson will “keep business rules 2 defining actions to be taken regarding correspondence based on attributes of the 3 correspondence,” rules such as maintaining contact lists and checking the sender and recipients 4 of the communications; the salesperson will then “apply those business rules to the 5 correspondence,” which would entail matching the incoming communications to particular 6 contacts and particular accounts, and then filing those updates in the correct records. 7 Symantec, 838 F.3d at 1317. People.ai finds this sort of analogy improper because, in its view, 8 to adequately track the claims, the salesperson would need to maintain communications for 9 multiple companies (Opp. I at 15–16). But having a salesperson manage communications from 10 several businesses, rather than just one, does not destroy the analogy. Consulting firm and 11 business-services companies, for example, often handle the communications for multiple 12 businesses. 13 The asserted claims of the ’129 patent do little else than recite a common commercial 14 practice long performed by humans. In fact, the specification explains how the ’129 patent 15 addresses the “challenges of manually entering data” into CRM (Opp. I at 14, citing ’129 16 patent, col. 1:18–37). And limiting the claims to a particular technological environment, like 17 CRM management, renders them no less abstract. See Capital One, 850 F.3d at 1340; Return 18 Mail, 868 F.3d at 1368; FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089, 1094–95 19 (Fed. Cir. 2016). The claims recite an architecture but: “Although these data structures add a 20 degree of particularity to the claims, the underlying concept embodied by the limitations 21 merely encompasses the abstract idea itself of organizing, displaying, and manipulating data.” 22 Capital One, 850 F.3d at 1341. Indeed, this order finds it difficult to conceptualize associating 23 emails to a business opportunity without considering the sender and recipients, triggering the 24 preemption concern that Alice noted. 25 This order pauses for a moment to address People.ai’s related accusation that SetSail has 26 presented contradictory theories on the scope of the patent claims in this action, which 27 undermines its arguments for judgment on the pleadings (Opp. II at 9–12). People.ai argues 1 [were] specific and People.ai’s allegations need to be highly detailed to honor their 2 limitations.” Now, in contrast, SetSail “takes the contrary position and asks this Court to find 3 the claims to be so broad as to be meaningless” (ibid.). People.ai’s argument here is specious. 4 The order granting SetSail’s motion to dismiss dealt with the adequacy of People.ai’s 5 pleadings. Here, we review the adequacy of People.ai’s patents under Section 101. 6 Turning back to our Alice evaluation, People.ai seeks to align its patent claims with those 7 considered in McRO, where the Federal Circuit found the claims it reviewed patent eligible at 8 Alice step one (Opp. I at 6; Opp. II at 15). But McRO is largely inapposite. 9 First, McRO dealt with patent claims directed to automatically animating facial 10 expressions for animated characters. Here, in contrast, all the asserted claims concern data 11 analytics optimization for CRM. A cascade of other Federal Circuit cases are more apt 12 comparisons. The claims in Symantec concerned filtering methods for emails and other data 13 files. 838 F.3d at 1313. Return Mail addressed claims that recited methods for processing 14 undeliverable mail and relaying mailing address data. 868 F.3d at 1367–68. The claims in 15 Capital One recited systems and methods for editing XML documents by extracting data for 16 user manipulation and then saving the modifications in the underlying XML document. 850 17 F.3d at 1339–40. Content Extraction considered claims directed to extracting data from 18 documents, recognizing specific information from the data, and storing that data in a memory. 19 776 F.3d at 1345, 1347. All of these decisions found the claims they reviewed patent- 20 ineligible subject matter under Alice. Our claims are much more comparable to the claims in 21 those actions than the claims in McRO. 22 Second, and relatedly, the claims in McRO employed “unconventional rules” that 23 replaced subjective, artistic actions performed by humans with specific, objective, and 24 mathematical rules executed by computer. McRO, 837 F.3d at 1303, 1313–14. Here, there is 25 simply no artistic, subjective element in the commercial process of recognizing the senders and 26 recipients of emails and associating those emails with various accounts and business profiles. 27 See also FairWarning, 839 F.3d at 1094. 1 Third, People.ai misreads McRO when it argues that its patent claims are not directed to a 2 patent-ineligible abstract idea because they recite specific limitations (e.g., Opp. I at 2, 6–7, 14; 3 Opp. II at 3, 8, 12–13). McRO upheld the claims at Alice step one because they set out 4 “meaningful requirements” and were limited to “rules with specific characteristics.” McRO, 5 837 F.3d at 1313 (emphasis added). Nowhere in McRO did the Federal Circuit suggest that, 6 without more, a claim directed to a patent-ineligible abstract idea could pass muster because it 7 recites many, detailed claim limitations. That runs afoul of Alice, which warned against 8 making an eligibility determination that depends simply on the draftsman’s art. 573 U.S. at 9 224 (citing Parker v. Flook, 473 U.S. 584 (1978)). None of the limitations recited in claim 20, 10 despite their numerosity and verbosity, are meaningful requirements. Rather, the claim 11 elements recite only generic, conventional ways of sorting and organizing data. People.ai also 12 cites Koninklijke KPN N.V. v. Gemalto M2M GmbH, 942 F.3d 1143, 1149–50 (Fed. Cir. 2019), 13 which likewise focused on specificity at step one. But Koninklijke emphasized specificity to 14 distinguish patent-eligible improvements in computer capabilities from abstract ideas that 15 merely invoke computers as a tool. A highly specific invocation of a computer as a tool 16 remains ineligible. We consider the technical improvements People.ai proffers for the asserted 17 claims of the ’129 patent at step two. See Enfish, 822 F.3d at 1339. Lastly, the Federal Circuit 18 has certainly not hesitated in finding lengthy, detailed claims patent ineligible. See, e.g., In re 19 Bd. of Trustees of Leland Stanford Junior Univ., 989 F.3d 1367, 1370–72 (Fed. Cir. 2021). 20 In sum, this order finds that the asserted claims of the ’129 patent are directed to an 21 abstract idea. This order proceeds to Alice step two. 22 * * * 23 At Alice step two, defendants contend that the asserted claims of the ’129 patent contain 24 no inventive concept and recite merely generic computer components. People.ai makes two 25 arguments that the claims embody an inventive concept. First, it says the asserted claims of 26 the ’129 patent represent a technical improvement because they are directed to storing 27 associations between electronic activities and record objects separate from the CRM. Second, 1 People.ai states that the claimed invention improves efficiency. This order finds defendants’ 2 arguments persuasive here. 3 We start with People.ai’s centerpiece inventive-concept theory. People.ai contends the 4 system recited in all the asserted claims of the patents-in-suit represent a technical 5 improvement because they claim “the storing of associations between electronic activities and 6 record objects separate from the system of record such as the CRM” (Opp. I at 17; Opp. II at 7 19). People.ai explains that “storing associations and carrying out matching between electronic 8 activities and record objects outside of the CRM allows for more efficient syncing to the CRM 9 and solves a technological problem related to API request limits imposed by CRMs” (Opp. I at 10 8; Opp. II at 2). 11 Remember, an inventive concept cannot be concocted from the pleadings or the 12 specification, it must be firmly rooted in the language of the claim. In other words, an 13 unclaimed feature cannot constitute an inventive concept. See, e.g., ChargePoint, 920 F.3d at 14 766, 769; Am. Axle & Mfg., 967 F.3d at 1293. At first blush, the asserted claims of the ’129 15 patent do not appear to recite the technical solution that People.ai describes. The ’129 patent 16 describes itself as being directed towards automatically associating electronic activities with 17 record objects, thereby addressing the problem of entering data manually, which can be 18 challenging, time consuming, and error prone (’129 patent at Abstract, Background). People.ai 19 offers three explanations for how the asserted claims capture the technical improvement they 20 have put forward here. 21 First, in its briefing, People.ai explains: 22 The claim recites “one or more processors” that are configured to access electronic activities (such as emails) from electronic 23 accounts “associated with one or more data source providers” and the same one or more processors maintain “record objects of one 24 or more systems of record” (CRM systems) and maintain node profiles and store associations between the electronic activities and 25 record objects. Dkt 21-1 at 199:20-61. Therefore, the “one or more processors” are separate from the processors of the CRM system 26 and the associations between the record objects and the electronic activities are stored separate from the CRM system 27 1 (Opp. I at 17). This explanation fails to demonstrate a separation between the processors of the 2 CRM and the processors of the claimed system. While claim 20 of the ’129 patent notes the 3 number of processors — “one or more” — it does not define the location or relationship of the 4 claimed system’s processors relative to the processors of the CRM. The claim language only 5 recites that the association between the electronic activity and the record object is stored “in a 6 data structure,” which does not preclude storage of the association in the CRM system itself 7 (’129 patent, col. 199:61). Indeed, despite People.ai generally asserting this theory, claim 11 8 of the ’345 patent expressly mandates storing the associations in the CRM. More on that issue 9 later. 10 Second, at the hearing, People.ai offered a further explanation for its separation theory. 11 Counsel argued the hook lies in the use of (plural) “systems of record”: 12 So our point in the briefing is, you can’t maintain a record object of one or more systems of record if you are the system of 13 record. You must be a system separate from the system of record in order to maintain record objects of multiple systems of record. 14 So the idea here is the data processing system is maintaining record objects for many different customers, many 15 different systems. And it’s doing this matching, it’s doing this, you know, maintaining the node profiles and performance prediction. 16 And it’s able to push this information back to the data source providers, like we talked about in the briefing, you know, through 17 sort of a bulk sync or through bulk transmissions. 18 (Tr. 15–16). As this order understands it, on the one hand, you have the claimed system that 19 maintains data from systems of record. On the other hand, you have several, individual 20 systems of record — the systems whose data is ingested and maintained by the claimed system. 21 Counsel would have us find a logical division between these two systems; that logical division 22 resulting in associations between electronic activities and record objects being stored separate 23 from the system of record. But the internal logic of counsel’s premise does not track the 24 language of the claim. Counsel acknowledges this theory requires the claimed system 25 maintain record objects from multiple systems of record, otherwise nothing prevents the 26 claimed system from being maintained within the CRM itself. But the claim has no such 27 limitation, and recites a system configured to “maintain a plurality of record objects of one or 1 Third, People.ai presented figure three at the hearing for support of its inventive concept 2 theory, which is a common figure in all seven patents-in-suit: ee ee ee ee eee ee ee eee ee eee ieemenpalnnel 9302 i PERFORMANCE) | | = 4 wide SS FEATRIATON He rae | we $320 mA 5 yATCHNG ‘Geapa [> PROCESGING) | 6 ! Ls ! 7 : iwoesnow] «= [SGOT | = F-SaDaW)... [S00 : 8 AZ ss to NN ?