Headed in reverse

SUPPOSE YOU'RE A software developer with the good habit of keeping an eye on what the competition is doing. And suppose you find a new feature in your competitor's latest release that your customers would probably like. Can you implement a similar feature, or would that make you guilty of violating the "no reverse engineering" clause in your competitor's shrink-wrap license?

Outlandish as it may seem, a recent federal appellate court ruling appears to be saying that you indeed would be guilty of violating a contractual obligation in such circumstances. On Aug. 20, the Federal Circuit Court of Appeals issued a decision in the Massachusetts case of Bowers vs. Baystate Technologies, upholding the enforceability of a standard on reverse engineering in Bowers' shrink-wrap agreement. Quite simply, if the court's decision truly becomes the law of the land, it has the potential to destroy the software industry in this country.

The case goes back more than 10 years, when Bowers and Baystate Technologies had competing add-on products for CadKey, a computer-aided design product. In 1991, Baystate released a new version of its product that Bowers felt duplicated too closely the menu structure of its interface template for CadKey.

Baystate officials acknowledged in later testimony that they had indeed spent several weeks analyzing Bowers' product in what they considered routine competitive analysis. Baystate appears to have argued that the similarities in the products were due to the fact they were both implementing ANSI (American National Standards Institute)-standard CAD commands for the same underlying product. Suits and countersuits followed, involving patent and copyright claims as well as breach of the reverse engineering clause, with Bowers triumphing in a jury trial. Baystate appealed and, in the meantime, Baystate acquired CadKey itself, becoming CadKey Corp.

In its decision last month, the Federal Circuit Court reversed the patent infringement verdict (for which you can be grateful, since it spares you having to hear my rant about the utter stupidity of software patents). Unfortunately, it saw no reason to consider the merits of Bowers' copyright infringement case because "the shrink-wrap agreements in this case are far broader than the protection afforded by copyright law." I say that's unfortunate because it means we don't know what evidence of copyright infringement was presented to the original jury. Were there signs of source code being copied, or was it all based on the "look-and-feel" arguments in vogue for software copyright cases at the time? Not knowing those facts, we can't really say who deserves to win this case.

What's really important here is not whether Bowers or Baystate/CadKey wins, but the precedent the court is setting with the facts as it presents them. This decision flies in the face of some well-known Federal Circuit Court decisions that have basically said that, in a case like this, the reverse engineering clause would apply only to aspects of Baystate's product that infringed Bowers' intellectual property rights. Instead, this court held federal copyright law would not "preempt or narrow the scope of Mr. Bowers' contract claim. Courts respect freedom of contract and do not lightly set aside freely entered agreements."