The Federal Circuit Court of Appeals invalidated seven patents owned by an AI technology company after applying the two-step Alice test. Scott Hervey and Audrey Millemann talk about this decision on this episode of The Briefing.

Watch this episode on the Weintraub YouTube channel here.

Scott:
Under the Alice test for patent subject matter eligibility, the Federal Circuit Court of Appeals continues to strike down patents directed to abstract ideas. The case of People AI, Inc. V. Clary, Inc. was just such a case in which the Court invalidated seven patents owned by People AI. We are going to talk about this case and the Alice test on this next installment of The Briefing by Weintraub Tobin. Welcome to another episode of The Briefing by Weintraub Tobin. I am joined today by my partner, Audrey Millemann, a patent attorney who wrote an intriguing article titled a Prototypical Corporate Salesperson Is Not Patentable. We’ll be discussing the recent People AI v. Clary, Inc. Case and its implications on patent subject matter eligibility under the Alice test. Welcome, Audrey.

Audrey:
Hi, Scott. How are you?

Scott:
Great to have you here today, Audrey. So, let’s start by discussing the Alice test for patent subject matter eligibility. Can you explain the two-part test established by the Supreme Court in the 2014 case of Alice Corp. Versus CLS Bank International?

Audrey:
Yes, I can. Patent subject matter eligibility refers to whether an invention falls within categories of subject matter that can be patentable. So that’s referred to as patent eligible subject matter and by statute. And that’s federal statute. Section 101 of Title 35 of the United States Code provides that there are four categories of patent eligible subject matter, and they are articles of manufacture, machines, processes, and compositions of matter. And there are exceptions to those categories of patent eligible subject matter which the courts have decided over the years. And they include things like natural phenomenon, laws of nature, and abstract ideas. And those things are deemed to fall within patent ineligible subject matter, meaning they are not something that can be the subject of patent protection. So, the Supreme Court in Alice in 2014 developed a test for determining whether a claimed invention falls within patent ineligible subject matter, meaning whether it is something that is not eligible for patent protection. It’s a two-part test. And under the first step, the Court examines whether the invention falls within one of those types of ineligible subject matter, meaning natural phenomena, laws of nature, or abstract ideas. And if the invention falls within one of those categories, then the Court would proceed to step two.

Under step two, the Court looks to see if there is some kind of inventive concept or something that improves the technology such that it takes it out of the patent ineligible subject matter and makes it into patent eligible subject matter. Now, this is a very complicated test, and courts have been struggling with how to apply it for years. Since it was decided.

Scott:
In the People AI versus Clary case, the Court invalidated seven patents owned by People AI based on the Alice test. Can you explain the basis of that Court’s decision?

Audrey:
Yes. People AI is a company that provides business analytics or software for customer relations management. So, they developed software that would take the notes and contacts that a salesperson would have. So, their notes of meetings, telephone calls, emails, and the software would automatically match it up to the particular customer that was involved. So, this was previously done by salespersons with using a pen and a notebook. And People AI developed software that would automate that process, which made it much more reliable, more accurate, so it would be less errors and much faster. And they patented that software, which basically was a data management kind of a system.

Scott:
And People AI sued Clary Inc. And Set Sail Technologies, Inc. For patent infringement. Correct.

Audrey:
Yes, they did. The defendants were competitors of People AI, and they sued them for People AI sued them for patent infringement of seven of their patents. The defendants then moved for judgment on the pleadings in the district court arguing that those patents were invalid because they were directed to patent ineligible subject matter, meaning abstract ideas. The district court applied the Alice test, as we’ve discussed it, and found that, yes, the patents are invalid because they are directed to abstract ideas. They’re directed to what a salesperson would do. And automating what people used to do manually does not make something patentable. The Federal Circuit, which is the Court of Appeal that addresses all appeals from patent infringement cases, affirmed the district court’s decision and held that automating that previously manual process doesn’t necessarily lead to patentable subject matter.

Scott:
Now, the court’s ruling seems to emphasize the importance of an inventive concept. Can you shed some light on why the court deemed these patents as lacking such a concept?

Audrey:
Well, yes, although it’s difficult because, as I said, that test is very complicated. But the decision hinged on the fact that the court believed there was no inventive concept, there was nothing in the invention that would transform and that’s a key word that the Supreme Court used that would transform patent ineligible subject matter, an abstract idea, into something that was patentable. And the Supreme Court has been very clear that simply using a computer to automate something that has previously been done manually doesn’t add an inventive concept. You need something that changes the technology or transforms it beyond merely automating.

Scott:
It very interesting. So, with that in mind, what are some key takeaways for inventors and companies looking to patent their inventions after this ruling?

Audrey:
Well, the key takeaway is really that companies need to be very cautious about trying to patent things that are simply transforming manual processes into automated or computer managed processes. They have to be very cautious in doing that and consider, is there something about their invention? Can they describe something about their invention that transforms what is an abstract idea into something that is more patent eligible?

Scott:
And with the Alice test being used to reject patent claims during the examination process and invalidate patents in courts, how can applicants better navigate this framework to improve their chances of obtaining a patent?

Audrey:
Well, the first thing they can do is to carefully analyze what their invention is, to determine if it really does fall within patent ineligible subject matter. And if it does, it may be worth considering whether one should apply for a patent at all. If the decision is made to go forward and apply for a patent in such a situation, then the goal is to try to describe the invention in such a way that there is an inventive concept, or that the invention transforms what is something ineligible into something that is eligible subject matter. And also important in that is the patent attorney who is drafting the patent application. That person has to be very careful and thoroughly drafting to make sure that they describe whatever possible inventive concepts the invention has. And also, they need to be thorough in their arguments with the Patent Office, because that prosecution of the patent is going to go on for several years. They need to be very careful in arguing to try and demonstrate that the invention does, in fact, have an inventive concept beyond simply automating a previously manual process.

Scott:
Well, Audrey, thank you very much for shedding light on People AI versus Clary Inc. And the complexities of patent subject matter eligibility under the Alice test. You always do a really great job of making complex matters a little bit more understandable, and this discussion certainly helped me better appreciate the importance of inventive concepts when seeking patents. The road to patent protection will always have its challenges, but with the right approach, inventors and companies can safeguard their innovations effectively. Again, Audrey, thank you so much. It was a pleasure having you on the briefing.

Audrey:
And thanks, Scott, for having me.

Scott:
Well, that wraps it up for today’s episode of The Briefing by Weintraub Tobin. We hope you found this discussion interesting and valuable. Please remember to subscribe to our podcast and to our YouTube channel so you never miss an episode.