Nondisclosure works well in the United States, which has laws like the Industrial Espionage Act of 1996, which makes it a criminal offense to steal trade secrets. But the law does not apply to non-U.S. citizens acting outside U.S. borders. Bierce, though, says India's reaction is already reassuring for U.S. companies. "Even if [the prosecutor] doesn't win, he's inspired fear," Bierce says. He also says that if prosecutors lose the case, they'll almost certainly complain that India's existing legal structures are not sufficient. He predicts that "some bright, young legislator will propose a new, more specific law."

The Finer Points of Law

Perhaps. Then again, it may be a long wait. Many observers still say too few U.S. companies worry about intellectual property theft when they send software development overseas, and that those that do fret nevertheless don't make sufficient efforts to protect themselves contractually. Why the Alfred E. Neuman-like serenity? In the case of India, which by some estimates has about 90 percent of the market for offshore software outsourcing, it's largely because the country is a member of the World Trade Organization and adheres to its intellectual property add-on, Trips (Trade-Related Aspects of Intellectual Property Rights). In addition, several of the largest Indian outsourcing companies are incorporated in the United States and can be sued here. But Trips protections still must be enforced locally, and no countries prominent in software outsourcing have local laws covering theft of trade secrets.

"Complying with Trips is a starting point, but plenty of countries have signed Trips agreements. China is one of them, but there are plenty of examples of piracy or misappropriation of design by Chinese firms," says Michael Murphy, an attorney at Shaw Pittman. Trips signers or not, if a country's culture does not respect property, the courts are unlikely to enforce laws. Several sources interviewed for this article agreed, though not for attribution, that China regards intellectual property - especially that of foreigners - as communal property.

Despite its near miss on source code, SolidWorks has no plans to stop outsourcing to India. It won't even change business partners. It has worked closely with GSSL for more than six years, and has had the company do its debugging for the past five.

"It's been a very good relationship for us," says Holly Stratford, vice president and general counsel for SolidWorks. "We think it's very cost efficient, and it's a talented group of people. At times they've been almost a virtual office of ours."