Restrictive Clause

Reverse Engineering Prohibition

Restricts the Receiving Party from reverse engineering, decompiling, disassembling, or otherwise analyzing confidential materials to discover underlying trade secrets or proprietary methods.

Medium Complexity

What This Clause Does

A reverse engineering prohibition clause prevents the Receiving Party from analyzing, decompiling, disassembling, or otherwise examining confidential materials (such as software, hardware, formulas, or processes) to discover how they work or to extract proprietary information. This clause extends protection beyond what is disclosed directly, covering information that could be derived through technical analysis of the materials provided.

Why This Clause Matters

Protects Trade Secrets: Without a reverse engineering prohibition, recipients could legally extract trade secrets from products or samples, undermining the entire purpose of the NDA.
Preserves Competitive Advantage: Proprietary methods, algorithms, and formulations are often discoverable through reverse engineering. This clause prevents competitors from learning your secrets through technical analysis.
Strengthens Trade Secret Claims: Courts consider whether reasonable protective measures were taken when evaluating trade secret misappropriation claims. A reverse engineering prohibition demonstrates such measures.
Addresses Technical Due Diligence: When sharing prototypes, samples, or beta software for evaluation, this clause prevents the evaluator from extracting the underlying technology.
Supplements Copyright Protection: While copyright protects expression, it does not protect underlying ideas or methods. Reverse engineering restrictions fill this gap contractually.

Legal Context

Reverse engineering is generally legal in the United States when performed on lawfully obtained products without a contractual prohibition. However, parties can contractually agree to restrictions that go beyond default legal protections. Some limitations apply: the Digital Millennium Copyright Act (DMCA) allows certain reverse engineering for interoperability purposes, and some courts have found overly broad restrictions unenforceable. The EU Software Directive similarly provides exceptions for interoperability. Courts generally enforce reasonable reverse engineering prohibitions, especially in commercial contexts where the restriction is bargained for.

Reverse Engineering Prohibition The Receiving Party shall not reverse engineer, disassemble, decompile, or otherwise attempt to derive the source code, structure, or design of any software, hardware, or other materials provided under this Agreement.

Basic Version: Simple prohibition suitable for general business discussions. May not cover all forms of analysis or provide adequate remedies.

Reverse Engineering and Analysis Restrictions 1. Prohibition. The Receiving Party shall not, directly or indirectly, reverse engineer, disassemble, decompile, decode, decrypt, or otherwise attempt to derive or gain access to the source code, underlying ideas, algorithms, file formats, data structures, or non-public APIs of any Confidential Information, including any software, hardware, samples, prototypes, or other materials provided by the Disclosing Party. 2. Scope. This prohibition includes, without limitation: (a) Automated or manual analysis of software behavior or output; (b) Physical or electronic examination of hardware components; (c) Chemical or physical analysis of samples, formulations, or materials; (d) Statistical analysis or benchmarking designed to reveal proprietary methods; and (e) Using artificial intelligence or machine learning tools to extract or derive proprietary information. 3. Exceptions. This prohibition shall not prevent the Receiving Party from: (a) Independently developing similar technology without reference to the Disclosing Party's Confidential Information; or (b) Engaging in activities expressly permitted by applicable law that cannot be waived by contract. 4. Return of Materials. Upon request or termination of this Agreement, the Receiving Party shall promptly return or destroy all materials subject to this section and certify such return or destruction in writing.

Standard Version: Comprehensive coverage of various reverse engineering methods with clear exceptions for independent development and legally protected activities.

Absolute Reverse Engineering and Analysis Prohibition 1. Comprehensive Prohibition. The Receiving Party absolutely and unconditionally agrees that it shall not, and shall ensure that its affiliates, employees, contractors, agents, and any third parties acting on its behalf do not, under any circumstances: (a) Reverse engineer, disassemble, decompile, decode, decrypt, translate, adapt, or modify any Confidential Information; (b) Attempt to derive or reconstruct the source code, object code, algorithms, data structures, protocols, formats, specifications, or architectural design of any software, hardware, or technology; (c) Conduct any form of technical, chemical, physical, statistical, or computational analysis of any samples, prototypes, products, materials, or outputs; (d) Use any automated tools, including but not limited to debuggers, disassemblers, decompilers, protocol analyzers, or AI/ML systems to examine or analyze Confidential Information; (e) Benchmark, profile, or monitor the performance characteristics of any software or systems to derive proprietary methods; or (f) Assist, enable, or permit any third party to perform any of the foregoing activities. 2. Prohibition on Circumvention. The Receiving Party shall not circumvent, disable, or interfere with any technical protection measures, access controls, or security features protecting the Confidential Information. 3. No Exceptions. This prohibition applies regardless of the purpose of such activities, including for interoperability, compatibility, security research, or any other purpose. The Receiving Party waives any rights under applicable law to engage in reverse engineering or similar activities to the maximum extent such waiver is permitted. 4. Monitoring Rights. The Disclosing Party reserves the right to audit the Receiving Party's systems and facilities, upon reasonable notice, to verify compliance with this section. 5. Liquidated Damages. The Receiving Party acknowledges that any violation of this section would cause irreparable harm to the Disclosing Party that would be difficult to quantify. Accordingly, in addition to any other remedies, the Receiving Party agrees to pay liquidated damages of $500,000 per violation, which the parties agree represents a reasonable estimate of the Disclosing Party's damages. 6. Survival. This prohibition shall survive termination of this Agreement indefinitely.

Warning - One-Sided: This version is extremely restrictive and may be partially unenforceable. The waiver of legal rights, blanket audit rights, and liquidated damages provisions are aggressive. Receiving Parties should negotiate exceptions for legally protected activities, remove audit provisions, and cap or eliminate liquidated damages.

1
Preserve Interoperability Rights: Negotiate an exception allowing reverse engineering necessary for interoperability with your own systems. Many jurisdictions protect this right by law, and attempting to waive it may make the entire clause unenforceable.
2
Protect Independent Development: Ensure the clause explicitly allows independent development of similar technology. Without this carve-out, you could face claims simply for developing competing products.
3
Limit Scope to Provided Materials: Push back if the clause tries to cover products purchased on the open market or information obtained from public sources. Restrictions should only apply to materials provided under the NDA.
4
Negotiate Security Research Exceptions: If you need to evaluate the security of provided software, negotiate an exception for security testing and vulnerability research, with appropriate confidentiality protections for findings.
5
Resist Audit Provisions: Audit rights allowing the Disclosing Party to inspect your systems are invasive and create security risks. Either remove them or add strong limitations on scope, notice, and frequency.
6
Challenge Liquidated Damages: Pre-set damage amounts for reverse engineering violations are often unenforceable as penalties. Negotiate to remove them or ensure they represent a genuine pre-estimate of loss.

Waiver of Statutory Rights

Language requiring you to waive rights under laws like the DMCA or EU Software Directive may be unenforceable and could invalidate the entire clause. Push back on blanket waivers of legally protected activities.

Prohibition on Competitive Products

If the clause prohibits you from developing any competing products (not just those derived from reverse engineering), it functions as a non-compete and should be evaluated separately from the NDA.

Unlimited Audit Rights

Provisions allowing the Disclosing Party to audit your systems without reasonable limitations on scope, notice, and frequency create security and confidentiality risks for your own business.

Perpetual Restrictions

Reverse engineering prohibitions that survive "indefinitely" or "in perpetuity" may be unreasonable, especially for technology that becomes publicly known or obsolete. Push for reasonable time limits.

Criminal Referral Threats

Language threatening criminal prosecution for reverse engineering is often overreaching. While some violations may have criminal implications, contractual threats of criminal referral are inappropriate in commercial agreements.

Reverse Engineering Prohibition

What This Clause Does

Why This Clause Matters

Legal Context

Waiver of Statutory Rights

Prohibition on Competitive Products

Unlimited Audit Rights

Perpetual Restrictions

Criminal Referral Threats

Related Clauses

Intellectual Property Ownership

Definition of Confidential Information

Permitted Use

Injunctive Relief

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