Contract case could hurt reverse engineering

A U.S. Supreme Court decision could call into question a common practice among software companies: studying competitors' products to improve their own offerings.

The legality of this practice, called reverse engineering, is in question after a lower court found that a software company had violated a shrink-wrapped license contract when it reverse-engineered a competitor's piece of software.

Last week, the Supreme Court decided not to hear the accused software company's appeal.

Although the breach of contract ruling applies only to the U.S. Court of Appeals for the Federal Circuit, the Supreme Court's lack of action could embolden other software companies to prohibit reverse engineering or take away other fair use rights allowed under copyright law by including such prohibitions in an end user license agreement, said Karen Copenhaver, a patent and intellectual property lawyer with Testa, Hurwitz and Thibeault, of Boston.

But the lawyer who defended the reverse engineering prohibition said the case was simply about a small software developer trying to protect his investment.

The case in question, Bowers vs. Baystate Technologies, involves software inventor Harold L. Bowers, who alleged that Baystate violated a section of his software's end user license agreement (EULA) that forbid users from reverse engineering his software. A lower court agreed and awarded Bowers $5.27 million.

Baystate had looked at Bowers' computer-aided design (CAD) software in order to make improvements in its competing package, although the extent of the reverse engineering is still in dispute, 12 years after the first legal action in the case.

Although reverse engineering is generally defined as reversing software's machine code back to the source code, Baystate claims it looked only at Bowers' user interface in order to improve its CAD software product. "There was no evidence of cracking encrypted source code or anything of that nature," said Bob Kann, Baystate's lawyer, of Bromberg and Sunstein, in Boston. "This may cause havoc in the industry. Before this case, it was perfectly legal to evaluate a competitor's product."

But Bowers' lawyer countered that Baystate had two weeks in its development schedule to examine Bowers' software, giving the software vendor time to look at more than the user interface. "They had two weeks to reverse engineer his software," countered Bowers' lawyer, Frederic Meeker, of Banner and Witcoff, of Washington, D.C. "Two weeks is a long time -- that's a lot of looking."

The impact of the case, said Copenhaver, is that end user license agreements could become more restrictive. "Saying you can reserve that [reverse engineering prohibition] in a shrink-wrap license is saying a company can put virtually anything in a shrink-wrap," Copenhaver said. "Now there are very few limitations on what people will try to put on a shrink-wrap."

Meeker disagreed, saying the inventor was simply trying to protect a piece of software he had worked on for years. Bowers, then living in southern Virginia, had mortgaged his house to market his CAD software package, called Designer's Toolkit, Meeker noted.