Mark ‘300-850’ for Credit-Scoring Was Merely Descriptive, Fraudulently Registered

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A consumer credit scoring company's mark “300-850” was merely descriptive of the qualities and characteristics of the company's credit score, the U.S. Court of Appeals for the Eighth Circuit ruled Aug. 17 (Fair Isaac Corp. v. Experian Information Solutions Inc., 8th Cir., No. 10-2281, 8/17/11).

Affirming a district court's dismissal of the company's trademark infringement and false advertising claims against competing credit bureaus, the court also upheld a jury determination that the mark had not acquired secondary meaning and therefore was invalid. The appellate court further agreed that the company had fraudulently registered the mark with the Patent and Trademark Office.

Lower Court: Mark Invalid, Fraduently Obtained

Fair Isaac Corp., or FICO, developed sophisticated algorithms for generating credit scores that characterize consumer financial creditworthiness and has become the most widely used credit-scoring algorithm in the industry. The company was issued a trademark registration by the Patent and Trademark Office for “300-850,” which is the range of credit scores one can receive through a FICO algorithm.

Experian Information Solutions Inc., Equifax Inc., and Trans Union LLC are credit bureaus that aggregate and sell consumer credit data that shows consumer debt-paying history. As part of a joint venture—VantageScore Solutions LLC—the bureaus introduced in 2006 a credit score algorithm that could compete with FICO. That algorithm, VantageScore, would also reduce the amount the credit bureaus paid as royalty for using FICO's algorithms. The credit bureaus reduced the price of VantageScore credit scores to entice lenders to adopt the new scores.

FICO sued the bureaus, alleging trademark infringement and false advertising.

The U.S. District Court for the District of Minnesota dismissed FICO's false advertising claims, also determining that FICO's registered trademark was merely descriptive.

The credit bureaus counterclaimed, asserting that FICO obtained its registration by fraud. A jury determined that FICO's mark had not acquired secondary meaning—and thus the mark was invalid—and that FICO had procured the registration through fraud on the PTO. However, the district court also denied the bureaus' post-trial motion for attorneys' fees.

Both sides appealed.

Mark to Inform Customers of Range

FICO contended that its mark is not merely descriptive because, when adopted, it had no meaning in the credit-scoring industry and there was no competitive need for the score range to be 300-850 or even numeric. It asserted that the bureaus were required to show that consumers of credit-scoring services view its mark as merely descriptive to rebut the mark's presumption of validity and that they failed to satisfy this burden.

Judge Roger L. Wollman said that the test for descriptiveness is what consumers, not persons in the trade, understand the term to be. The bureaus presented evidence that the mark conveyed the approximate range of FICO's credit scores and that FICO had selected the mark for that reason, the court noted. Further, the bureaus presented evidence of how FICO used its mark in the credit-scoring market: to inform consumers that their credit scores will fall within that range of numbers.

The court rejected FICO's argument that none of this evidence demonstrated that consumers considered the mark to be merely descriptive. It said that FICO's use of the mark in the credit-score market is “evidence of what consumers perceive the mark to be.”

Viewing the evidence in the light most favorable to FICO, the court concluded that there was no genuine issue of fact “that consumers in this market immediately understand ‘300-850' to describe qualities and characteristics of FICO's credit score.” Thus, the court ruled that the district court did not err in finding the mark to be merely descriptive.

Fraud on PTO Shown

Next, FICO argued that there was insufficient evidence to support the jury's conclusion that it procured registration for the mark by fraud. The jury found that (1) FICO made a false representation during the application process to the PTO for the registration of the mark, (2) FICO knew that representation to be false when it was made and intended to deceive the PTO, and (3) the PTO relied on the false representation in deciding to issue the registration.

At trial, the bureaus presented statements from a FICO employee stating that only the FICO score uses the 300-850 range as a unique identifier for credit bureau risk scores. FICO said that this statement is true because no one else used the range as a unique identifier and thus the jury had no basis to conclude that the statement was false. The bureaus asserted that FICO did not use the mark as a unique identifier, and presented an expert who said that the employee's statement was false because the “300-850” was not used to identify the source of FICO's products, but was instead used only to identify a credit score range, similar to other credit-score ranges.

FICO's outside legal counsel also made a statement in response to the PTO's initial rejection of the registration, stating that the mark was not descriptive because 300-850 is the credit scoring scale only for FICO's credit bureau-based risk products and not for other credit bureau-based risk products that competitors develop. The court, citing the credit bureaus' use of the 300-850 credit score range, said that a reasonable jury could conclude that the counsel's statement was false.

FICO contended that, even if the statements were considered false, there was insufficient evidence to establish that the statements were made knowingly with an intent to deceive the PTO. The bureaus presented evidence that FICO's employee knew that it was using the same credit-score range and that FICO was not using 300-850 as a trademark. Further, it argued that FICO's counsel knew that FICO was not using the mark as a trademark when she responded to the PTO's initial rejection of the registration. Thus, the court also concluded that a reasonable jury could have inferred that FICO had an intent to deceive the PTO.

The bureaus also presented an expert who testified that a reasonable examiner would consider it important in deciding whether to allow the registration to know whether others were using 300 to 850 as a score range for credit scoring services. Further, the PTO had initially rejected the mark because it was merely descriptive and did not issue the registration until after FICO had made the two statements discussed earlier.

Thus, there was sufficient evidence for a reasonable jury to determine that the PTO relied on a false representation in deciding whether to issue the registration, the court said.

No Licensee Estoppel

In 2006, Experian signed a license agreement that permitted it to use FICO's 300-850 trademark and which contained a no-contest provision stating that Experian would not challenge the validity of FICO's exclusive rights to its trademarks. The district court overruled FICO's objection to the introduction of evidence by Experian that FICO's trademarks were invalid and following the ruling, FICO moved for judgment as a matter of law on the issue of licensee estoppel, requesting a new trial that precluded Experian from presenting evidence and arguments challenging whether the mark is entitled to protection. FICO unsuccessfully argued that VantageScore was under absolute control of Experian and the other bureaus which precluded it from challenging FICO's mark under principles of agency and equity.

The doctrine of licensee estoppel provides that a licensee is estopped from contesting the validity of its license. The district court found that FICO did not present evidence that VantageScore was the alter ego of Experian or the bureaus collectively. The court here agreed with the district court that VantageScore was not a licensee and thus not estopped from challenging the mark.

FICO asserted that its trademark should have been deemed valid regarding its claims against Experian, even if VantageScore was allowed to challenge the registration, but the court said that a mark that is invalid cannot be infringed. Thus, the court concluded, “Because VantageScore successfully challenged the mark, it cannot serve as the basis of an infringement action.”

False Advertising Claims Properly Dismissed

The court also said that the district court properly dismissed FICO's false advertising claim, ruling that statements made on Experian's website advertising the “Plus Score” which has a range of 330-830 and the phrase “see the same type of score that lenders see” were not literally or implicitly false.

FICO had argued that, by featuring a range nearly identical to its mark and by suggesting that the Plus score is used by most lenders, Experian was falsely advertising its products in a manner intended to mislead consumers into believing they are buying either the FICO score or a score widely used by lenders, neither of which is true.

The court concluded:

 

Consumers purchasing Experian's PLUS Score are seeing a credit score of the “same type” that lenders see, namely a score indicative of how lenders would assess an individual's creditworthiness. Contrary to FICO's assertion, nothing about Experian's statement, explicitly or implicitly, suggested that most lenders actually use the PLUS Score. Experian's call scripts—the only evidence FICO presented—did not demonstrate that there was an implicitly false message conveyed that had the tendency or deceived a significant segment of the advertisement's audience. Accordingly, we conclude that FICO's false advertising claims were properly dismissed.

No Attorneys' Fees

Finally, Experian contended that the district court abused its discretion by finding that this case was not exceptional and thus not awarding reasonable attorney fees.

The district court found that FICO's claims were not wholly without merit and that it presented sufficient evidence to survive motions for summary judgment and judgment as a matter of law, which was inconsistent with the contention that FICO's infringement claims were groundless and unreasonable.

Thus, the court said that the district court did not abuse its discretion in determining that this case was not exceptional and affirmed the order denying the motion for attorneys' fees.

Judges Kermit E. Bye and Bobby E. Shepherd joined the opinion.

FICO was represented by Ronald J. Schutz of Robins, Kaplan, Miller & Ciresi, Minneapolis. Experian was represented by Mark A. Jacobson of Lindquist & Vennum, Minneapolis.

By Nathan Pollard