http://www.infoworld.com/articles/op/xml/02/09/16/020916opgripe.xml
The Gripe Line Ed Foster
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."
The implications of this interpretation of a shrink-wrap license being a
real contract are pretty staggering. As Bowers' law firm, Banner &
Witcoff, Ltd. of Washington, D.C., put it in a press release after the
decision was issued, "This decision is important for software companies
that routinely analyze the features of competitors' products when making
an improved version of their own product ... a company, which analyzes a
competitor's product in violation of a shrink-wrap license agreement, may
be liable for substantial damages."
Others who are less happy about the decision agreed that it could have
very serious consequences. "The biggest problem is that, the way the
court wrote the decision, it seems to have found that a shrink-wrap
restriction is not preempted," says Jonathan Band, an intellectual
property attorney at Morrison Foerster in Washington, D.C. "Having come
up with this problematic decision, it could be followed by other courts."
According to Band, Baystate/CadKey is filing for a rehearing of the case,
and there is some hope that the court will entertain briefs from
interested parties who were previously unaware of the case. So it's not
yet time for panic. Even if the ruling does stand, it doesn't overturn
the very different precedents that exist in several other federal
circuits.
Still, it's a step in a very dangerous direction. It's somewhat ironic
that the court chose to take such a UCITA-like approach to treating a
shrink-wrap as an example of "freedom of contract." I suspect even some
of UCITA's biggest supporters will be less than overjoyed with this
decision. Under the criteria this court applied, wouldn't Microsoft be as
guilty of reverse engineering Netscape to create Internet Explorer as
Baystate was of reverse engineering Bowers' product?
Virtually all software companies have prohibitions against reverse
engineering in their shrink-wrap licenses, yet virtually all software
companies reverse engineer other products. It's not just a matter of
keeping up in the feature wars -- reverse engineering is a necessary tool
for interoperability and security purposes. But judges and juries may not
understand this, and the consequences of their lack of understanding in
this most litigious of societies could be very grave indeed. Like it or
not, the competition is going to analyze your software to make their own
better. It's just a matter of whether that competition will be doing so
in this country or somewhere else.
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