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What's up with reverse engineering?

I've heard of people using reverse engineering for security purposes. Why would they do that? Can reverse engineering be a hazardous activity, one that may land developers in hot water if detected? Could it lead someone to think that software piracy was happening?
Reversing is currently a gray area from a legal standpoint and I am not a lawyer to respond in that capacity. However, reverse engineering is a requirement for anti-virus software companies as well as some other security technologies. Thus, it can serve the "powers of good" just as well as it serves the powers of evil. And yes, some experts have predicted that it is theoretically possible for a virus author to sue an anti-virus for reverse engineering their "virus solution."

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