Reverse Engineering vs. Trade Secret Theft: where the law draws the line

In today’s fast-moving technology landscape, competition often hinges on who can develop smarter, faster, and more efficient software. In this race, companies frequently analyze rival products to understand better how they work—a practice known as reverse engineering. But where does this legitimate technical strategy end and trade secret theft begin?

It’s an increasingly central question in modern software litigation. At Eureka Software, we’ve supported numerous cases where courts had to evaluate whether a company engaged in lawful reverse engineering or misappropriated proprietary information. The distinction isn’t always obvious, but the legal consequences can be severe.

This blog will explore the difference between reverse engineering and trade secret theft, the legal standards that apply, and how expert analysis is critical in resolving these disputes.

What Is Reverse Engineering?

Reverse engineering is analyzing a product to understand how it works, aiming to learn from or replicate its functions. In software, this may involve:

Examining a compiled program to infer its logic

Monitoring system behavior and inputs/outputs

Decompiling or disassembling code

Reconstructing data flows, interfaces, or algorithms

This practice is not only widespread—it’s often legally permissible. Reverse engineering can be used to:

Improve compatibility or interoperability

Conduct a security analysis

Innovate new features

Understand competitor strategies

Importantly, reverse engineering is not inherently illegal—in fact, it’s protected under certain circumstances, especially in the context of fair use and interoperability.

What Is Trade Secret Theft?

Trade secret misappropriation, by contrast, involves the unlawful acquisition, use, or disclosure of confidential business information. In the context of software, this might include:

Copying or using proprietary source code without permission

Accessing protected repositories or development environments

Disclosing internal tools or algorithms obtained through a breach of confidentiality

Under the Defend Trade Secrets Act (DTSA) and similar state laws, companies can pursue legal action if they can show that:

The information was a trade secret.

Reasonable measures were taken to protect its secrecy.

The information was acquired through improper means.

"Improper means" can include theft, bribery, espionage, breach of contract, or breach of duty to maintain confidentiality. It does not include lawful reverse engineering.

Legal Boundary: When Reverse Engineering Crosses the Line

Here’s where the issue gets tricky: not all reverse engineering is legal, and not all trade secret claims are valid. The law draws the line based on how the information was acquired and whether the party doing the reverse engineering had a right to access and analyze the product in the first place.

Reverse Engineering Is Generally Lawful When:

The product was lawfully obtained (e.g., purchased in the market).

There was no breach of a license agreement or NDA.

The analysis does not involve unauthorized access to protected or confidential materials.

The party did not use insider knowledge or improperly acquired information to aid the reverse engineering.

Reverse Engineering May Be Unlawful When:

A developer uses knowledge from a former employer to recreate a product.

The software was decompiled in violation of a license agreement.

Internal source code, obtained through a leak or internal theft, was used in the analysis.

The information was accessed in breach of a confidentiality obligation or contract.

The Role of Expert Witnesses in Reverse Engineering Disputes

When allegations of trade secret theft arise, courts often turn to expert witnesses to help determine whether reverse engineering was conducted legitimately or improperly. At Eureka Software, we provide expert analysis in these disputes by:

1. Analyzing Code Similarities

We conduct detailed comparisons of source code, algorithms, and software behavior to determine:

Whether the code was copied or independently created

Whether any similarities are the result of standard industry practices

If reverse engineering methods led to the alleged duplication

2. Reviewing Development History

We trace how the accused product was developed:

What tools were used?

Who wrote which parts of the code?

Were internal documents from a competitor referenced?

This helps establish whether the information was acquired through lawful reverse engineering or improper means.

3. Evaluating Access and Intent

We examine:

Who had access to trade secrets?Were NDAs or confidentiality agreements signed and violated?

Were efforts made to obscure or conceal the source of the information?

This kind of technical and behavioral analysis often becomes the turning point in a legal case.

Best Practices for Businesses

Whether you're innovating or protecting your IP, it’s essential to understand the legal landscape around reverse engineering and trade secrets.

To Avoid Misappropriation Claims:

Use only lawfully obtained software when analyzing competitors.

Keep detailed documentation of development workflows and sources.

Avoid using former employees’ knowledge of confidential systems without legal clearance.

Train developers on the limits of reverse engineering and IP law.

To Protect Your Trade Secrets:

Mark and classify trade secret materials.

Limit access to proprietary code and tools.

Use NDAs and confidentiality agreements with employees, vendors, and partners.

Monitor development activity for signs of improper use or leaks.

Let Eureka Software Help

The line between reverse engineering and trade secret theft is narrow, but critically important. Companies have the right to analyze products in the marketplace, but that proper ends where confidentiality begins. When disputes arise, the technical story behind a product's construction becomes essential.

At Eureka Software, we provide the expert analysis and courtroom-tested insights that help attorneys, companies, and courts understand whether a trade secret was misappropriated—or whether the defendant simply did what competitive companies have done for decades: figure it out themselves.

If you're facing a trade secret or reverse engineering dispute, contact Eureka Software to learn how our technical expertise and litigation support can help protect your position.