Employee migration, reverse engineering or unfair competition? (Italian Supreme Court, Civil Division, order no. 18958/2023)

When “reverse engineering” becomes unlawful

“We did not misappropriate anything, we merely reconstructed the product”. This apparently legitimate explanation relies on the principle of reverse engineering as a natural dynamic of competition. The Milan Court of Appeal, however, brings the issue back to a much more concrete level.

It is not enough to say that a result is theoretically reproducible: for the argument to hold, the reconstruction must actually be accessible to experts in the field, with timeframes, costs and skills that are proportionate. If, on the contrary, it requires such resources as to make it improbable or disproportionate, the reverse engineering defence loses strength. The central question then returns: were those pieces of information really accessible from outside, or not?

The second aspect – often decisive in litigation – concerns the lawfulness of the path taken. Reverse engineering is legitimate only if the analysis starts from what was actually available on the market. It cannot stem from unauthorised access to drawings, technical files or internal documentation. This is the point on which the Court is particularly clear: an unlawful acquisition does not become lawful merely by changing its label.

In short, when a company is faced with a product that is “too similar”, the real question is not whether the result could theoretically have been achieved, but by what means it was achieved. And if those means include confidential data, processes or restricted access, the issue moves out of the technical domain and squarely into that of infringement.

Sometimes they simply take the team with them (employee poaching)

The Milan Court of Appeal adopts a very pragmatic criterion: not every movement of personnel is unlawful, but it may become so when it takes the form of an organised strategy capable of harming a competing company. The starting point remains simple: no one can force an employee to stay against their will, and recruitment in itself does not constitute unfair competition. However, when the acquisition of human resources becomes systematic, targeted and affects critical roles, it may fall within the scope of unlawful employee poaching under Article 2598(3) of the Civil Code.

Employee poaching is rarely proven through a single decisive element. More often, it emerges from a set of concrete indicators, including:

• the number of employees involved;
• the timeframe over which the moves occur;
• the nature and relevance of the roles (especially if strategic or difficult to replace);
• the business area affected (particularly if technical or critical);
• any attempts to approach additional employees of the same company.

What matters is not the individual move, but the operation as a whole – especially if it appears designed to drain key skills and facilitate the replication of know-how. The competitive intent may be inferred from the facts, even in the absence of explicit statements (see: When does hiring competitors’ employees constitute unlawful conduct? – Canella Camaiora).

For businesses, therefore, the issue is not preventing departures, but recognising when mobility turns into a competitive strategy. If moves are isolated and spread over time, the phenomenon remains physiological. But when they are concentrated on key technical profiles, within a short timeframe and alongside the growth of a new competitor, the picture changes: from an HR dynamic to a concrete legal risk.

But what is all this worth in economic terms? In the final section, we will see how damages for unfair competition and misappropriation of trade secrets are actually assessed.

What is the value of “what they took away from me”?

At this point, the matter ceases to be purely technical and becomes an accounting exercise: margins, turnover, sales, profits. And this is where one of the most recurrent features of this type of litigation emerges: the decisive figures are almost never in the hands of the injured party, but in those of the wrongdoer.

This is why, in disputes over industrial secrets and unfair competition, orders for disclosure often represent a crucial turning point. The legal framework is clear: on the one hand Article 210 of the Code of Civil Procedure, on the other Article 121 of the Industrial Property Code, which strengthens access to evidence in IP cases. The judgment reiterates that targeted, necessary and sufficiently specific disclosure orders are legitimate, and that an unjustified refusal to produce documents may be assessed by the court as an evidentiary argument under Article 116(2) of the Italian Code of Civil Procedure.

This passage is central because it clarifies what is not happening: damage is not “invented”, but rather opacity by one party is prevented from making its reconstruction impossible. It is on this basis that the Court reframes the issue of quantification: damages are rarely the result of a purely arithmetic formula, but of an assessment that may include counterfactual evaluations and, where necessary, equitable quantification.

In the case examined, damages were anchored to concrete economic elements, in particular the negative variation in margins recorded after the competitor’s entry into the market, assessed in light of a plurality of proven conducts: use of confidential information, replication of technical solutions not resulting from autonomous design, employee poaching and attempted poaching, commercial denigration and repeated non-compliance with disclosure orders.

The court of first instance had quantified damages at a higher level; the Court of Appeal reduced them on an equitable basis, also taking into account the presence of other market players, but still set them at € 2,500,000. The Italian Supreme Court, in order no. 18958/2023, declared the appeal inadmissible, leaving this reconstruction intact: liability established, calculation method reasoned, and concrete economic consequences.

The overall message of the decision is clear: once unlawful conduct is proven, the judgment does not stop at a declaration of liability, but proceeds all the way to remedies and figures. And those figures are not symbolic. They are the result of an assessment that brings together conduct, evidence, procedural behaviour and economic data, without shortcuts and without automatisms.