People.ai, Inc. v. Clari Inc.

Background

People.ai brought a patent-infringement action against Clari involving seven patents. The patents generally concerned systems and methods for automating data parsing and analysis to improve information used by a customer-relationship-management system. Clari challenged all seven patents under Section 101, the federal patent-eligibility provision.

In an earlier order, the court granted Clari’s motion for judgment on the pleadings under Rule 12(c), which allows judgment based on the pleadings when the pleadings show that a party is not entitled to relief. Applying the Supreme Court’s two-step framework for evaluating patent eligibility, the court held that all asserted claims were patent-ineligible.

The day before the hearing on Clari’s motion, People.ai moved for leave to file a second amended complaint. The proposed amendment relied on allegations based on a declaration by Oleg Rogynskyy and sought to connect the patents’ claimed benefits and technical improvements to the claim language. People.ai also proposed allegations concerning the ability to match an electronic activity with more than one record object.

Analysis

Rule 15 generally provides that leave to amend should be freely given when justice requires. Relevant considerations include bad faith, undue delay, prejudice to the opposing party, futility, and repeated failure to cure deficiencies through earlier amendments. An amendment is futile when the proposed complaint would still fail to state a claim for relief.

The court found undue delay and failure to cure pleading deficiencies. Clari had previously challenged patent eligibility, and People.ai had amended its complaint once after that challenge. People.ai nevertheless waited until after Clari filed its second patent-eligibility challenge and supporting reply brief to seek additional allegations. People.ai did not explain why it had omitted those allegations from its earlier amendment or why it waited until the eve of the hearing.

The court also found the amendment futile. It concluded that the new allegations did not tie the asserted technical improvements and inventive concepts to the actual language of the patent claims. The court had previously found that People.ai’s proposed inventive concept—storing associations between record objects and electronic activities outside and separately from the customer-relationship-management platform—was not recited by the claims. The proposed allegations did not correct that problem and largely repeated arguments previously rejected.

The court likewise found that the proposed theory about matching an electronic activity to multiple record objects was futile. In the court’s view, that theory did not amount to significantly more than the abstract idea of matching communications to the correct file. The court also noted that the proposed allegation included an unexplained qualification about customer-relationship-management systems generally allowing only one matching record object.

Finally, the court found prejudice to Clari because Clari had already spent substantial time and money preparing two Rule 12 motions. Allowing another amendment would have imposed additional expense and given People.ai another opportunity to assert allegations that should have been included earlier. The court did not specifically find bad faith, but it declined to endorse what it described as a shifting approach to keeping the case alive.

Disposition

The court denied People.ai’s motion for leave to file a second amended complaint with prejudice. It denied Clari’s motion to amend the case-management scheduling order as moot.