Fair Isaac Corporation v. Federal Insurance Company

Background

Fair Isaac Corporation (FICO) brought a copyright-infringement action concerning Federal’s use of FICO’s Blaze Advisor software after FICO terminated a software license and maintenance agreement. FICO’s operative complaint alleged that Federal’s continued use of Blaze Advisor constituted unauthorized reproduction of registered works.

The parties’ scheduling order set deadlines for discovery and dispositive motions. Fact discovery ended in March 2019, expert discovery ended in June 2019, and dispositive motions were due by July 26, 2019. The parties later engaged in two rounds of summary-judgment and expert-testimony motions. The court granted some parts and denied other parts of those motions in orders issued in 2020 and 2021.

After discovery had ended, Federal deposed FICO’s vice president of software engineering, Jean-Luc Marce, in November 2021. FICO produced a chart prepared by Marce showing the number of lines of code in different Blaze Advisor versions and the numbers of lines added, deleted, or unchanged between versions.

Federal then moved to amend the scheduling order so it could file a motion to exclude Marce’s testimony and a supplemental summary-judgment motion addressing FICO’s remaining copyright claims. Magistrate Judge David T. Schultz denied that request, concluding that the proposed motions would be futile. Federal appealed that ruling to the district judge.

Governing standard

Because the appeal concerned a nondispositive scheduling ruling, the district court could modify or set aside the magistrate judge’s decision only if it was clearly erroneous or contrary to law. A scheduling order may be changed under Federal Rule of Civil Procedure 16(b)(4) only for “good cause,” which primarily depends on the moving party’s diligence. Courts may also consider prejudice to the opposing party and retain discretion to enforce scheduling deadlines even when good cause is shown.

Analysis

Judge Wright concluded that futility generally is not part of the good-cause analysis under Rule 16(b)(4). Futility is relevant to some requests to amend pleadings under Rule 15, but Federal was seeking to amend the scheduling order, not the pleadings. The court therefore could not affirm the magistrate judge’s ruling on the futility rationale alone.

The court nevertheless affirmed the result because Federal had not shown sufficient diligence. FICO had identified multiple Blaze Advisor versions in its complaint and had disclosed information and witnesses concerning copyright ownership and preexisting material in later software versions. The court concluded that these disclosures put Federal on notice by early 2017 that source code and comparisons among software versions could be relevant. Federal did not request the source code during discovery and did not depose FICO employees about the relevant differences until after the dispositive-motion deadline.

The court rejected Federal’s argument that FICO’s disclosures referred only to copyright-registration certificates and not source code. The court explained that copyright ownership in software arises from authorship of an original work fixed in a tangible medium, and that source code may be evidence of that ownership. The court also rejected Federal’s argument that FICO’s pleadings limited the case to use of registered versions of Blaze Advisor. It interpreted the pleadings as broad enough to include FICO’s theory that an unregistered version was derivative of registered versions and that use of the unregistered version could therefore constitute unauthorized reproduction.

The court further concluded that changing the schedule would prejudice FICO. The requested change would allow a third round of dispositive motions nearly three years after the deadline, after the scheduling order had already been modified six times and the earlier motion practice had generated almost 1,000 pages of briefing, excluding exhibits. The court found that another round would cause unnecessary delay and expense.

The court also addressed the proposed evidentiary challenge to Marce. It agreed that Marce was being offered as a lay witness rather than an expert witness. His testimony concerned the process by which FICO modified the software and mathematical calculations about how many lines of code remained identical. The court stated that professional experience does not by itself turn lay testimony into expert testimony, and that Federal could challenge the accuracy of Marce’s calculations through cross-examination and contrary evidence.

Because Federal had not plausibly shown that excluding Marce’s testimony or the source-code evidence was warranted, the court concluded that the proposed supplemental summary-judgment motion would not provide a valid basis for reopening dispositive motion practice. Even if Federal had shown good cause, Judge Wright stated that she would exercise the court’s discretion to deny the requested schedule change because it would not promote a just, speedy, and inexpensive resolution.

Disposition

The court affirmed Magistrate Judge Schultz’s January 12, 2022 order on alternative grounds. The opinion did not decide the underlying copyright-infringement claims; it addressed only Federal’s request to amend the pretrial scheduling order.