Fair Isaac Corp. v. Fed. Ins. Co.

Decision Date23 March 2020
Docket NumberCase No. 16-cv-1054 (WMW/DTS)
Citation447 F.Supp.3d 857
Parties FAIR ISAAC CORPORATION, Plaintiff, v. FEDERAL INSURANCE COMPANY and ACE American Insurance Company, Defendants.
CourtU.S. District Court — District of Minnesota

Allen W. Hinderaker, Heather J. Kliebenstein, Joseph Dubis, Michael A. Erbele, Merchant & Gould PC, Minneapolis, MN, for Plaintiff.

Christian Victor Hokans, Christopher D. Pham, Leah C. Janus, Lora Mitchell Friedemann, Nikola L. Datzov, Ryan Cameron Young, Terrence J. Fleming, Fredrikson & Byron, PA, Minneapolis, MN, for Defendants.

ORDER

Wilhelmina M. Wright, United States District Judge

Plaintiff Fair Isaac Corporation (FICO) and Defendants Federal Insurance Company (Federal) and ACE American Insurance Company (ACE American) (collectively, Defendants) cross-move to exclude expert testimony and for summary judgment. (Dkts. 360, 369, 378, 386, 396, 404, 419, 428.) FICO also moves to strike aspects of Defendants' summary judgment filings. (Dkt. 551.) For the reasons addressed below, the parties' motions to exclude expert testimony are granted in part and denied in part, FICO's motion to strike and motion for summary judgment are denied, and Defendants' motion for summary judgment is granted in part and denied in part.

BACKGROUND

FICO designs and develops predictive-analytics and decision-management software. One of FICO's decision-management software tools is the FICO® Blaze Advisor® business rules management system (Blaze Advisor), which is used to design, develop, execute, and maintain rules-based business applications. FICO maintains federal copyright registrations for multiple versions of Blaze Advisor.

Chubb & Son, an unincorporated division of Federal, is an insurance manager for multiple insurance companies and offers information technology services. ACE American, a sister company to Federal, provides insurance-related services to insurance company subsidiaries of Federal. On June 30, 2006, FICO and Chubb & Son entered into a software license and maintenance agreement (License Agreement). The parties subsequently amended the License Agreement twice—first on August 1, 2006, and again on December 28, 2006. As amended, the License Agreement provides Chubb & Son a perpetual license to use Blaze Advisor enterprise-wide.

Before January 15, 2016, Federal's parent corporation was Chubb Corporation. On January 15, 2016, Chubb Corporation merged with—and Federal became a subsidiary of—ACE INA Holdings, Inc. On January 27, 2016, FICO sent Federal written notice that FICO believed Federal had breached Section 10.8 of the License Agreement, which governs assignments or transfers of the License Agreement. Thereafter, based on Federal's alleged refusal to cure the purported breach, FICO sent Federal written notice that FICO would terminate the License Agreement effective March 31, 2016.

On April 21, 2016, FICO commenced this lawsuit alleging breach of the License Agreement and copyright infringement. FICO filed a second amended complaint on September 11, 2018, which is the operative complaint in this case. Count I alleges that Federal breached Sections 3.1, 10.8, and 9.3 of the License Agreement. Count II alleges that Federal infringed FICO's copyright interests by reproducing and distributing FICO products to third parties without authorization. Count III alleges that Federal infringed FICO's copyright interests by continuing to use Blaze Advisor and related FICO products after FICO terminated the License Agreement. Count IV alleges that both Federal and ACE American infringed FICO's copyright interests as a result of ACE American's unlicensed use and reproduction of Blaze Advisor and related FICO products.

Defendants assert two counterclaims against FICO. First, Defendants allege that FICO breached the License Agreement by purporting to terminate it without the right to do so. Second, Defendants allege that FICO breached an implied covenant of good faith and fair dealing by refusing to consent to Federal's continued use of Blaze Advisor and related FICO products after the merger. Currently pending before the Court are the parties' six cross motions to exclude expert testimony and two cross motions for summary judgment. FICO also moves to strike portions of Defendants' summary judgment briefing and a declaration that Defendants filed in opposition to FICO's motion for summary judgment.

ANALYSIS
I. Cross Motions to Exclude Expert Testimony

The admissibility of expert testimony is an issue of law for the district court to decide and is governed by Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). Rule 702 provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. "An expert may base an opinion on facts or data in the case that the expert has been made aware of or personally observed." Fed. R. Evid. 703. "If experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion on the subject, they need not be admissible for the opinion to be admitted." Id.

The proponent of expert testimony must prove its admissibility by a preponderance of the evidence. Lauzon v. Senco Prods., Inc. , 270 F.3d 681, 686 (8th Cir. 2001). " Rule 702 reflects an attempt to liberalize the rules governing the admission of expert testimony" and favors admissibility over exclusion. Id. (internal quotation marks omitted). Determinations as to the admissibility of expert testimony are within the district court's discretion. See Arkwright Mut. Ins. Co. v. Gwinner Oil, Inc. , 125 F.3d 1176, 1182 (8th Cir. 1997).

A district court must ensure that testimony admitted under Rule 702 "is not only relevant, but reliable." Daubert , 509 U.S. at 589, 113 S.Ct. 2786. When making this reliability determination, district courts may evaluate whether the expert's method has been tested or subjected to peer review and publication, the method's known or potential rate of error, and the method's general acceptance. Presley v. Lakewood Eng'g & Mfg. Co. , 553 F.3d 638, 643 (8th Cir. 2009) (citing Daubert , 509 U.S. at 593–94, 113 S.Ct. 2786 ). These factors are not exhaustive, and a court must evaluate the reliability of expert testimony based on the facts of the case. Id. A district court also may consider "whether the expertise was developed for litigation or naturally flowed from the expert's research; whether the proposed expert ruled out other alternative explanations; and whether the proposed expert sufficiently connected the proposed testimony with the facts of the case." Sappington v. Skyjack, Inc. , 512 F.3d 440, 449 (8th Cir. 2008) (internal quotation marks omitted). When weighing these factors, the district court must function as a gatekeeper to separate "expert opinion evidence based on ‘good grounds’ from subjective speculation that masquerades as scientific knowledge." Glastetter v. Novartis Pharm. Corp. , 252 F.3d 986, 989 (8th Cir. 2001).

Expert testimony is not admissible if it is "speculative, unsupported by sufficient facts, or contrary to the facts of the case," Marmo v. Tyson Fresh Meats, Inc. , 457 F.3d 748, 757 (8th Cir. 2006), such that it is "so fundamentally unsupported that it can offer no assistance to the jury," Minn. Supply Co. v. Raymond Corp. , 472 F.3d 524, 544 (8th Cir. 2006) (internal quotation marks omitted). But disputes about the factual basis of an expert's testimony ordinarily are issues of credibility—not admissibility—of the expert's testimony. Sappington , 512 F.3d at 450 ; see also Minn. Supply Co. , 472 F.3d at 544. "Vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence." Daubert , 509 U.S. at 596, 113 S.Ct. 2786.

A. FICO's Motions to Exclude Expert Testimony

FICO moves to exclude the opinions and testimony of Defendants' industry expert William McCarter, Defendants' licensing expert Dr. Steven Kursh, and Defendants' damages expert W. Christopher Bakewell. FICO does not challenge these witnesses' qualifications. Instead, FICO challenges the relevance and reliability of the opinions of these witnesses on several grounds. The Court addresses each expert witness in turn.

1. McCarter

FICO first moves to exclude the opinions and testimony of Defendants' industry expert, McCarter. Defendants intend to offer McCarter to opine about Defendants' use of Blaze Advisor and the extent to which Defendants' revenue and profits are attributable to their use of Blaze Advisor. FICO challenges McCarter's opinions as to disgorgement and market alternatives to Blaze Advisor. In doing so, FICO argues that McCarter's opinions lack a sufficient case-specific factual basis, lack a methodology of analysis, and rely on incorrect legal standards.

a. McCarter's Opinions as to Disgorgement

According to FICO, aspects of McCarter's disgorgement opinions lack a case-specific factual basis and methodology of analysis; instead, FICO contends, these opinions rely solely on McCarter's "experience."

A witness may be qualified as an expert based on the witness's knowledge, skill, experience, training, or education. Fed. R. Evid. 702 ; David E. Watson, P.C. v. United States , 668 F.3d 1008, 1014 (8th Cir. 2012). "[A]n expert might draw a conclusion from a set of observations based on extensive and specialized experience." Kumho Tire Co. v. Carmichael , 526 U.S. 137, 156, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999) ; ac...

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