Contract analysis

From: Wendy Schultz <wschultz@calderwoodharkness.com> To: Nina Chastain <nchastain@kesslerpa.com> Cc: Leonard Cross <lcross@calderwoodharkness.com> Subject: Quorum / Meridian Data License — Revised Derived-Data Proposal and Draft Commercialization Protocol

I hope this finds you well. I am writing in connection with the ongoing negotiation of the Master Data License Agreement ("MDLA") between our respective clients, Quorum Insurance Holdings Corp. ("Quorum") and Meridian Credit intelligence, Inc. ("Meridian") (C&H Matter No. 1025-00008).

As you know, derived-data rights have been one of the two principal open issues in this transaction since at least the January 18, 2023 first in-person negotiation session in New York, and the issue remained unresolved through the March 9, 2023 second session in Atlanta. Following the May 15, 2023 CEO-to-CEO call between Meg Tierney and Vince Halstead, the principals agreed that the teams should continue working towa

I am attaching two documents, described in detail below.

**Attachment 1 — Derived-Data Rights: Revised Quorum Position (Compromise Framework) (Redline of Proposed Article VII)**

The attached revised Article VII represents a substantial move from Quorum's original January 2023 position, which sought unrestricted ownership and commercialization rights over all Derived Data without Meridian consent or additional fees. The key elements of the compromise framework are as follows:

- **Ownership.** Quorum retains sole ownership of all intellectual property in Derived Data, which is defined to include data, models, scores, indices, and analytics outputs created by Quorum using licensed Meridian data as an input. This is consistent with the position Quorum has maintained throughout negotiations and reflects what we believe is the appropriate allocation given Quorum's significant investment in dev

- **No License-Back.** Quorum has carefully considered Meridian's request for a perpetual, royalty-free license-back on all Derived Data. We are unable to agree to this provision. A license-back of this scope would undermine Quorum's competitive position in the insurance analytics market and substantially erode the commercial rationale for the transaction from Quorum's perspective.

- **No Revenue Share.** Quorum similarly cannot accept Meridian's proposed 15% revenue share on third-party commercialization of Derived Data. Given Quorum's planned uses and the scale of its investment in analytics infrastructure, a revenue share at this level would be economically untenable.

- **Commercialization Subject to an Objective Transformation Standard.** Under the compromise, Quorum may commercialize Derived Data to third parties, subject to a condition that the outputs be "sufficiently de-identified and transformed." Critically, however, this determination would be made under an objective, jointly agreed standard rather than at Meridian's sole discretion. This addresses Quorum's fundamental obj

- **QuorumScore™ Carve-Out.** The compromise explicitly addresses Quorum's proprietary predictive underwriting model, QuorumScore™ (USPTO application pending, Serial No. 97/482,116). The revised Article VII recognizes that outputs of Quorum's machine-learning models that blend Meridian credit data with Quorum's own first-party claims, policy, and telematics data should not be subject to restrictions on commercializat

**Attachment 2 — Draft Derived Data Commercialization Protocol (Proposed Appendix to MDLA Article VII)**

The second attachment is a new document — a practical protocol appendix designed to operationalize the compromise framework set forth in revised Article VII. Its key features include:

- **Objective Transformation Criteria.** The Protocol establishes measurable, technically grounded criteria for determining when Derived Data is "sufficiently transformed and de-identified" such that Meridian raw data cannot be reverse-engineered from it. This replaces the subjective sole-discretion standard Meridian previously proposed with a framework both parties can apply predictably.

- **Notification Mechanism.** The Protocol provides for a notification mechanism — not a consent mechanism. Quorum would notify Meridian before commencing third-party commercialization of any category of Derived Data, but Meridian would not hold a veto right over the commercialization decision.

- **Tailored Dispute Resolution.** The Protocol includes a dispute resolution process designed specifically for transformation-standard disputes. This is intended to provide a streamlined path for resolving disagreements about whether a particular output meets the transformation criteria, without triggering the broader dispute resolution mechanism (which, as you know, remains a separate open item as between court jur

- **QuorumScore™ Deemed Compliance.** The Protocol contains an explicit carve-out confirming that QuorumScore™ and its outputs are deemed to satisfy the transformation standard as a matter of contract, in recognition of the extensive blending with Quorum's proprietary first-party data that occurs in generating those outputs.

We want to be candid about how Quorum views this proposal. Quorum considers the revised framework a significant compromise: it has moved from an unrestricted-rights position to accepting a transformation standard and a notification process — both of which impose real constraints on Quorum's freedom to commercialize outputs it owns and has invested substantially in creating.

What Quorum cannot accept, however, is: (a) a license-back that would give Meridian access to Quorum's proprietary analytics; (b) a 15% revenue share that would effectively tax Quorum's innovation investment; or (c) sole-discretion veto power for Meridian over Quorum's commercialization activities. We believe the attached framework addresses Meridian's legitimate interest in ensuring that its raw data is not re-sold

I would also note that the technical dispute underlying much of this discussion — whether machine-learning model outputs trained in part on Meridian data are properly characterized as "derived data" at all, as opposed to independent inference outputs — is addressed pragmatically in the Protocol rather than requiring the parties to resolve the theoretical copyright question. We think this is the right approach for a c

We hope that Meridian and your team will have an opportunity to review the attached materials in advance of the third negotiation session currently scheduled for June 30, 2023 in New York. It would be productive, in our view, if the teams could exchange preliminary reactions before the in-person session so that the June 30 meeting can focus on narrowing remaining gaps rather than first impressions of the revised prop

To that end, we are available for a call the week of June 19 or the week of June 26 to discuss initial feedback at whatever level of detail is useful. Please let me know what works for your team's schedule, and we will coordinate on our end with Leonard and Omar.

Finally, I want to note that this transmittal addresses derived-data rights only. The most favored nation pricing issue remains a separate open item, which Quorum intends to address at the June 30 session as well.

As a reminder, all materials exchanged in connection with these negotiations are subject to the Mutual Non-Disclosure Agreement between Quorum Insurance Holdings Corp. and Meridian Credit intelligence, Inc. (NDA-QIH-MCI-2022-001, dated August 15, 2022) and are transmitted without prejudice to either party's positions.

Thank you for your time and attention to this, Nina. We look forward to hearing from you and your team.

**Wendy Schultz** Associate, intellectual Property Practice Group Calderwood & Harkness LLP 425 Park Avenue New York, NY 10022 T: (212) 558-4720 E: wschultz@calderwoodharkness.com

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