Fair Isaac Corp. v. Experian Information Solutions Inc.

• Decision Date: 24 July 2009
• Docket Number: Civil No. 06-4112 ADM/JSM.
• Citation: Fair Isaac Corp. v. Experian Information Solutions Inc., 645 F.Supp.2d 734 (D. Minn. 2009)
• Parties: FAIR ISAAC CORPORATION and myFICO Consumer Services, Inc., Plaintiffs, v. EXPERIAN INFORMATION SOLUTIONS INC.; Trans Union, LLC; VantageScore Solutions, LLC; and Does I through X, Defendants.
• Court: U.S. District Court — District of Minnesota

645 F.Supp.2d 734

FAIR ISAAC CORPORATION and myFICO Consumer Services, Inc., Plaintiffs, v.EXPERIAN INFORMATION SOLUTIONS INC.; Trans Union, LLC; VantageScore Solutions, LLC; and Does I through X, Defendants.

Civil No. 06-4112 ADM/JSM.

United States District Court, D. Minnesota.

July 24, 2009.

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Charles F. Rule, Esq., Joseph J. Bial, Esq., Cadwalader, Wickersham & Taft, LLP, Washington, D.C., and Ronald J. Schutz, Esq., Randall Tietjen, Esq., Michael A. Collyard, Esq., Christopher K. Larus, Esq., David W. Beehler, Esq., Robins, Kaplan, Miller & Ciresi, LLP, Minneapolis, MN, on behalf of Plaintiffs.

Mark A. Jacobson, Esq., Mark H. Zitzewitz, Esq., Lindquist & Vennum PLLP, Minneapolis, MN, and M. Elaine Johnston, Esq., Robert A. Milne, Esq., Christopher J. Glancy, Esq., Jack E. Pace, III, Esq., Bryan D. Gant, Esq., White & Case LLP, New York, NY, on behalf of Experian Information Solutions Inc.

Lewis A. Remele, Jr., Esq., Christopher R. Morris, Esq., Bassford Remele, Minneapolis, MN, and James K. Gardner, Esq., Ralph T. Russell, Esq., Dao L. Boyle, Esq., Neal, Gerber, & Eisenberg LLP, Chicago, IL, on behalf of Trans Union, LLC.

Barbara Podlucky Berens, Esq., Justi Rae Miller, Esq., Kelly & Berens, PA, Minneapolis, MN, on behalf of VantageScore Solutions, LLC.

MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, District Judge.

I.INTRODUCTION

This matter is before the undersigned United States District Judge on the following motions: Defendant Trans Union, LLC's ("Trans Union")Motion for a Separate Trial on Plaintiffs' Breach of Contract Claim [DocketNo. 572];Trans Union and Defendant VantageScore Solutions, LLC's ("VantageScore")Motion for Summary Judgment Dismissing Contract-Related Counts [DocketNo. 575];Defendant Experian Information Solutions Inc. ("Experian"), Trans Union, and VantageScore's (collectively "Defendants")Motion for Summary Judgment Dismissing Trademark-Related Counts [DocketNo. 579];Defendants' Motion for Summary Judgment Dismissing Antitrust Counts [DocketNo. 585];Defendants' Motion for Summary Judgment Dismissing False Advertising Counts [DocketNo. 594]; and PlaintiffsFair Isaac Corporation and myFico Consumer Services, Inc.'s (collectively "Fair Isaac")Motion to Strike [DocketNo. 659].For the reasons set forth herein, Trans Union and VantageScore's Motion for Summary Judgment Dismissing Contract-Related Counts is granted, Trans Union's Motion for a Separate Trial is denied, Defendants' Motion for Summary Judgment Dismissing Antitrust Counts is granted, Defendants' Motion for Summary Judgment Dismissing Trademark-Related Counts is denied, Defendants' Motion for Summary Judgment Dismissing False Advertising Counts is granted; and Fair Isaac's Motion to Strike is denied.

II.BACKGROUND¹

A.Aggregated Credit Data and CreditScoring

The three major credit bureaus in the United States—Trans Union, Experian, and Equifax (collectively "the Credit Bureaus")—are the dominant sources of aggregated credit data of consumers in the United States, capturing a 100% combined share of the market for such data. 3d Am. Compl.[Docket No. 436]¶¶ 24, 220.Aggregated credit data consists of information reported by banks, credit card companies, mortgagees, and other lenders regarding a consumer's borrowing and repayment history.Id.¶ 11(b);Gant Decl., Jan. 30, 2009 [Docket No. 588], Ex. 1(a)(Noll Decl.)at 6.The Credit Bureaus use the aggregated credit data to generate consumer credit reports, which they sell to lenders who then use the information in deciding whether to extend credit to a consumer.Noll Decl.at 6.Credit data reporting is entirely voluntary, and individual lenders may have an agreement to provide consumer credit data to all, some, or none of the Credit Bureaus. 3d Am. Compl. ¶ 25.Consequently, each individual bureau often reports aggregated credit data that is different from the other two bureaus' aggregated credit data on the same consumer.Id.

In the 1980s, Fair Isaac developed a credit scoring model that applies quantitative algorithms to the aggregated credit data to calculate a credit score for a consumer.Noll Decl.at 6-7.As with the credit reports themselves, banks, credit card companies, mortgagees, and other lenders use credit scores to evaluate an individual consumer's financial credit-worthiness and the risk that the consumer will default on a credit obligation.Id.;3d Am. Compl. ¶¶ 21-22.Fair Isaac's credit scores ("FICO scores") quickly became dominant in the credit scoring market, and in 2005, 2006, and 2007, FICO scores represented, respectively, 78.1%, 78.3%, and 74.2% of all segments of the credit scoring market and more than 94% of the business-to-business segment of the market.²Noll Decl.at 7, 72.However, Fair Isaac typically does not sell FICO scores directly to lenders or consumers because Fair Isaac does not have direct access to the Credit Bureaus' aggregated credit data.³3d Am. Compl. ¶¶ 43-45.Instead, Fair Isaac enters into "scoring agreements" with the Credit Bureaus that allows the Credit Bureaus to sell FICO scores to lenders and consumers—typically as part of a bundle that includes a credit report containing the aggregated credit data underlying the credit score—in exchange for a royalty payment for each FICO score sold.Id.¶¶ 23, 44, 125;Noll Decl.at 7;BoyleDecl., Jan. 30, 2009[Docket No. 578], Exs. 1, 2.

Because the royalties paid to Fair Isaac represent a significant component of each of the Credit Bureaus' costs of business, the Credit Bureaus independently developed their own in-house credit scoring models to reduce their reliance on, and royalties paid to, Fair Isaac.Noll Decl.at 7.The Credit Bureaus were largely unable to convince lenders to switch from FICO scores to their in-house scoring models.Id. at 8.Lenders prefer the "tri-bureau" nature of FICO scores, which account for the previously mentioned differences in the aggregated credit data maintained by each bureau,⁴ over the Credit Bureaus' in-house scoring models, which do not account for the differences.Id.Although the Credit Bureaus sought to convert their in-house scores into tri-bureau scores, they were unable to do so because each bureau was unwilling to share its aggregated credit data with the other bureaus.GantDecl., Jan. 30, 2009, Ex. 3(b)(Noll Reply Decl.)at 40.

B.The Credit Bureaus' Joint Venture

In late 2003 or early 2004, representatives from Trans Union and Experian, including Trans Union CEO Harry Gambill and Experian CEO Don Roberts, met to discuss jointly developing a tri-bureau score.Bial Decl. [DocketNo. 629], Ex. 188(Hellinga Dep.) 26:19-31:12.Trans Union emails suggest that by March 2004, Trans Union was scheduling internal meetings to "discuss [the] feasibility and strategy around the development of an industry score by the three bureaus."Id.,Ex. 18.In a March 2004 email chain between Experian executives, Experian's vice president wrote:

I finally had a chance to speak with Paul Springman, Chief Marketing Officer[] at Equifax....The idea behind the conversation was to ascertain if an interest exist[s] to cooperate in some fashion to provide a tri-bureau risk score....He is personally in favor of exploring options ....The decision whether or not to move forward would need to be made by Chapman[, CEO of Equifax].[Springman] will be sending a note to Chapman.

Id.,Ex. 21.In response, Experian's CEO wrote:

[T]he only way I'm interested is if a totally new score is created ... and owned/endorsed by the 3 of us.That presents a challenging set of assumptions, that you and your gang at the other bureaus would have to agree on.I would say that if you can get the[] preliminary issues worked out, it would be easier for Chapman[,] Gambill[,] and I to deal with."

Id.At a November 22, 2004 meeting among Trans Union representatives, one individual wrote that the plan was for each bureau, Trans Union, Equifax, and Experian, to share ownership in a new company that would develop a new credit score with the goal of competing with FICO scores.Id.,Ex. 26.Fair Isaac alleges that the goal was not merely to compete with FICO scores but to eliminate FICO scores from the credit scoring market entirely.This proposed joint venture between the Credit Bureaus became "Project Trident" and ultimately lead to the formation of VantageScore and the VantageScore credit scoring model.SeeHellingaDecl., Jan. 30, 2009[Docket No. 593]¶ 3;Torrez Decl. [Docket No. 598]¶ 3;WiermanskiDecl., Jan. 30, 2009[Docket No. 590]¶¶ 2-4.

On February 16, 2005, representatives from the Credit Bureaus met in Texas to discuss Project Trident.⁵HellingaDep. 202:6-9.A second meeting was held nine days later on February 25, 2005.BialDecl., Ex. 37.Also in February 2005, Experian approached a consulting firm, Mercer Oliver Wyman("Mercer"), about providing assistance on Project Trident.Id.,Ex. 38.Mercer created a document that suggests that through the joint venture, the Credit Bureaus could build their own scoring model and transfer Fair Isaac's revenue entirely to themselves.Id.,Ex. 41.A primary risk facing the joint venture, however, was that if one bureau acted alone in attempting to convince the market to switch from FICO scores to the Credit Bureaus' jointly developed score, there would be a serious risk that its customers would switch to the other two bureaus to retain access to FICO scores.Id.Mercer recommended that this particular risk could be minimized if the three bureaus "act in concert."Id.

The Credit Bureaus formed a project team of representatives from each bureau.OliaiDecl., Jan. 29, 2009[Docket No. 600], ¶ 9.The team began work on Project Trident in July 2005.Id.¶ 10.The team first worked on developing algorithms for what ultimately became the VantageScore scoring model, and, in doing so, they relied on the algorithms in Experian's own in-house, tri-bureau...