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Enforcing Reverse Engineering Prohibitions in Shrink- and Click-wrap Licenses: A Report on Bowers v. Baystate Technologies, Inc.

By William S. Coats, Monte M.F. Cooper, and Mark J. Shean
May 01, 2003

The practice of “reverse engineering,” whereby one company obtains the product of a competitor and works backwards “to divine the process which aided in its development or manufacture,” has long been accepted as a legitimate (and sometimes wholly necessary) practice in the computer software marketplace. Kewanee Oil Co. v Bicron Corp., 416 U.S. 470, 476 (1974). It also has been upheld by Courts as a form of “fair use,” whereby competitors may make copies of one another's source or object code for purposes of study and analysis without incurring liability for copyright infringement. See, eg, Sony Computer Entertainment Inc. v. Connectix Corp., 203 F.3d 596 (9th Cir. 2000); Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 510 (9th Cir. 1992) (amended opinion); Atari Games Corp. v. Nintendo, 975 F.2d 832 (Fed. Cir. 1992).

Proponents of reverse engineering argue that it results in the public obtaining less expensive (and often higher quality) products. The practice is reviled, however, by many prominent software companies that view it as impairing their ability to protect intellectual property that often has been developed at great expense.

Not surprisingly, therefore, it has become common for software and hardware vendors to attempt to limit reverse engineering through the use of prohibitions contained within so-called “shrink-wrap” and “click-wrap” license agreements. Such licenses typically are unilaterally imposed upon consumers as a result of their opening the plastic wrapping on the outside of floppy disks, or by their clicking on the words “I agree” during Internet transactions. By accepting the terms of the license in this fashion, the purchasers also necessarily agree that they will not attempt to determine the functionality or underlying nature of the software through otherwise lawful practices, such as reverse engineering. If they ignore this prohibition, the purchasers presumably breach the contract and could be held liable for damages.

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