Drafting Electronic Software Licenses to Prevent Reverse Engineering

By Blaney Harper and Vaishali Udupa

As in-house counsel for XYZ software company, you have been tasked with protecting your client's most precious asset — its software code. The R&D manager in charge of XYZ's newest product has also just informed you that XYZ has developed a new "killer app" that is expected to provide XYZ with the cost and performance advantage it has been promising its customers and investors. The development of this new software has cost XYZ more than $10 million. XYZ's marketing department has already contacted potential customers and arranged for 100 of them to receive the beta version by the end of the month. The beta product and all documentation will be distributed electronically, as will the version for general release. What do you do?

You are, of course, well aware that a chief concern with any software release is preventing a competitor from using your product to create a cheap knockoff. Certainly, this is a danger for XYZ's product. As a result, you have made sure that XYZ only ships its product in executable (i.e., object) code form. You also know, however, that some who legitimately acquire the executable code may attempt to reverse engineer it to create that cheap knockoff. In such a case, XYZ's development investment would be lost. To guard against this risk, you have advised your client...

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