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Fair Isaac Corp. v. Federal Insurance Co.

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This article is about the 2016 federal lawsuit in which FICO sued the Chubb insurance group over its use of FICO Blaze Advisor after a merger. It is not legal advice.

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Fair Isaac Corp. v. Federal Insurance Co. is a lawsuit in the United States District Court for the District of Minnesota, filed on 21 April 2016. Fair Isaac Corporation (FICO), which sells the Blaze Advisor business rules management system, sued two insurance companies of the Chubb group after it terminated their perpetual, enterprise-wide Blaze Advisor licence following the January 2016 merger of Chubb Corporation and ACE Limited’s holding company. FICO pleaded breach of contract and copyright infringement.[1] A March 2023 jury found infringement; the court later denied FICO any share of the defendants’ profits and cut back the actual damages award.[3][4]

Background

On 30 June 2006 FICO and Chubb & Son, an unincorporated division of Federal Insurance Company, signed a software licence and maintenance agreement, amended on 1 August 2006 and 28 December 2006. The amended agreement gave a perpetual licence to use Blaze Advisor enterprise-wide, and a later order records the sums paid under the three documents: USD 173,750 for the first licence, USD 350,000 for the second, and USD 1,300,000 in total for the enterprise-wide grant.[1][3]

Section 10.8 of the agreement was a “No Assignment” clause. It barred assignment without the other party’s written consent, and it said that a change of control, a merger, an acquisition or a reorganisation of the licensee would be “deemed to be an assignment subject to this section”, with no expanded use of the software unless FICO gave written consent that was not to be unreasonably withheld.[1]

The dispute

On 15 January 2016 Chubb Corporation, then Federal’s parent, merged with ACE INA Holdings, Inc. Twelve days later FICO told Federal that it believed the merger breached section 10.8. When the matter was not resolved, FICO gave notice that it would terminate the licence effective 31 March 2016, and it sued on 21 April 2016.[1] The termination letter also alleged use outside the United States and use by outside consultants.[3] At the time Federal used Blaze Advisor in 15 internal applications.[3]

The defendants counterclaimed that FICO had no right to terminate and had acted in bad faith by withholding consent.[1]

Decision or outcome

  • Summary judgment, March 2020. The court held that the licence unambiguously contained no geographic restriction on where Blaze Advisor could be installed: “Territory” was defined in the definitions section but used nowhere else, so installation outside the United States was not a breach. It held that whether section 10.8 required consent for a deemed assignment, and whether use expanded, turned on disputed facts, so neither side won on that clause, and it found the scope of “Client and its Affiliates” ambiguous because Chubb & Son was not a legal entity.[1]
  • Supplemental summary judgment, March 2021. The court granted the defendants judgment on the copyright claim for pre-termination reproduction and distribution of the software, because FICO showed no act of infringement completed entirely in the United States within the three-year limitations period. The defendants conceded that the contract claim was not time-barred under New York’s six-year period.[2]
  • Jury trial, early 2023. The jury found the defendants liable for infringement through continued use after termination. Mid-trial the court ruled for the defendants on the question of which entity was the “Client”, which removed foreign-affiliate revenue from FICO’s damages case.[3][4]
  • Disgorgement denied, September 2023. The jury advised that FICO was not entitled to the defendants’ profits, and the court agreed, finding that FICO had not proved a causal link between Blaze Advisor and the insurers’ revenue. It adopted an award of USD 0.[4]
  • Actual damages, September 2023. The jury awarded USD 40 million. The court found the award unsupported by the trial record, because FICO’s own pricing showed enterprise-wide perpetual licences for large companies sold for far less, and held the highest reasonable licence fee was USD 6 million. It granted a new trial on actual damages unless FICO accepted a remittitur to that figure.[3]
  • Retrial and appeal. According to the defendants’ appeal brief, FICO rejected the remittitur, a second jury awarded USD 3.725 million, and FICO appealed the new-trial ruling, the size of the remittitur and the disgorgement ruling to the Eighth Circuit. The defendants’ brief states that neither side appeals the liability findings. This account comes from a party filing; the Eighth Circuit’s decision was not located in a primary record.[5]

Significance for software licensing and SAM practice

This is a district court dispute under New York contract law and United States copyright law, and it is not binding precedent. It is a detailed public example of what happens when a vendor treats a corporate merger as a licence event:

  • Merger clauses. The vendor relied on a clause that deemed a merger an assignment. The court found the clause open to two reasonable readings, and the issue went to a jury.[1]
  • Scope of “Client”. A licence granted to an unincorporated division produced a dispute over whether other group companies were licensed at all.[1]
  • Remedy. The licence fee the vendor charged similar customers, not a list-price theory, set the ceiling on actual damages.[3]

For other disputes over who may use a licence, see Compuware v. Health Care Service Corp. and Micro Focus v. Insurance Services Office. For the wider picture see software licensing litigation.

Lessons learned

  • A change-of-control clause that deems a merger an assignment can put a perpetual licence at risk if consent is not obtained. FICO terminated within weeks of the merger and the court treated the clause as open to competing readings.[1]
  • A vendor may terminate and sue even when the licensee uses the software in few applications. Federal used Blaze Advisor in 15 internal applications when FICO terminated.[3]
  • Damages for continued use after termination follow the vendor’s actual pricing. The court cut a USD 40 million verdict to a ceiling of USD 6 million based on FICO’s own price list and comparable licences.[3]
  • A definition that no operative clause uses does not create a restriction. “Territory” appeared only in the definitions section, so installation outside the United States was not a breach.[1]

References

  1. Fair Isaac Corp. v. Federal Insurance Co., No. 16-cv-1054 (D. Minn. Mar. 23, 2020), ECF No. 731, order on motions to exclude expert testimony and for summary judgmentCourt's own opinion, as published by the U.S. Government Publishing OfficeEffective 2020-03-23. Retrieved 2026-10-07.
  2. Fair Isaac Corp. v. Federal Insurance Co., No. 16-cv-1054 (D. Minn. Mar. 23, 2021), ECF No. 840, order on supplemental motions for summary judgmentCourt's own opinion, as published by the U.S. Government Publishing OfficeEffective 2021-03-23. Retrieved 2026-10-07.
  3. Fair Isaac Corp. v. Federal Insurance Co., No. 16-cv-1054 (D. Minn. Sept. 13, 2023), ECF No. 1284, order granting new trial on actual damages subject to remittiturRECAP archive copy of the court's orderEffective 2023-09-13. Retrieved 2026-10-07.
  4. Fair Isaac Corp. v. Federal Insurance Co., No. 16-cv-1054 (D. Minn. Sept. 12, 2023), ECF No. 1282, findings of fact and conclusions of law on disgorgementRECAP archive copy of the court's findingsEffective 2023-09-12. Retrieved 2026-10-07.
  5. Fair Isaac Corp. v. Federal Insurance Co., No. 25-1340 (8th Cir.), redacted brief of appelleesParty filing dated 2025-07-28; used only for the second jury's award and the issues on appeal, labelled as the defendants' accountEffective 2025-07-28. Retrieved 2026-10-07.

See also

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