A Competitor Created a Fake Company to Steal Trade Secrets: Why Controlling Access to Your Proprietary Software Matters

A federal judge in Chicago awarded insurance technology company Applied Systems a preliminary injunction in February 2026 after finding that competitor Comulate likely stole trade secrets by creating a fake insurance agency to gain unauthorized access to Applied's proprietary software platform. The case, which has continued with additional rulings through August 2026, illustrates how companies can exploit access to a competitor's software to misappropriate confidential business information and why controlling who uses your platforms is a critical part of any trade secret protection strategy.

The Dispute

Applied Systems develops Epic, a widely used agency management system in the insurance industry. Comulate, a competing insurtech startup, developed software designed to integrate with Epic. To build and test its product, Comulate created a fictitious insurance agency called "PBC" and used it to sign up for access to Epic. Through that access, Comulate was able to study and interact with Applied's proprietary platform in ways that went far beyond what a typical customer would do. Applied discovered the scheme in October 2025 after noticing abnormally large usage patterns from PBC's account.

Applied sued Comulate in November 2025, alleging trade secret misappropriation, breach of contract, and violations of the Computer Fraud and Abuse Act. In February 2026, the court found that Applied was likely to succeed on its claims and would suffer irreparable harm without an injunction. The judge ordered Comulate to immediately stop using any information obtained through its access to Epic and to stop selling products developed, tested, or trained using Applied's data to new customers. In August 2026, the judge issued a further ruling that trimmed some of Applied's claims but preserved the core trade secret misappropriation and computer fraud allegations for trial.

How Trade Secrets Can Be Stolen Through Legitimate-Looking Access

This case highlights a type of trade secret theft that many business owners overlook. Comulate did not hack into Applied's systems or bribe an employee for proprietary information. Instead, it gained access through what appeared to be a normal customer relationship. The fake agency signed up for the platform like any other user. The critical difference was that Comulate used that access not as a customer, but as a competitor studying the platform's inner workings to develop a competing product.

This approach is increasingly common in the software industry. A competitor may use a shell company, a third-party intermediary, or even a real customer relationship to gain access to proprietary tools and processes. Once inside, the competitor can reverse-engineer features, extract data, or learn technical details that would otherwise be protected as trade secrets. Courts have consistently held that contractual restrictions on software use, including prohibitions on reverse engineering and requirements that users be legitimate businesses, are enforceable and can form the basis of trade secret claims when violated.

Key Takeaway for Business Owners

If your business operates proprietary software, a subscription platform, or any system that grants third-party access to confidential processes, controlling and monitoring that access is an essential component of your trade secret protection strategy. Businesses should include clear contractual restrictions on how their platforms may be used, limit access to verified customers or partners, and monitor usage patterns for anomalies that could indicate unauthorized activity. Applied's ability to detect Comulate's unusual behavior was what triggered the investigation that led to a successful lawsuit. Without that monitoring, the misappropriation could have continued undetected.

Whether you are developing proprietary software or managing access to any confidential business system, proactive monitoring and strong contractual protections can make the difference between catching a trade secret violation early and discovering the damage after it is too late. Schedule a free consultation with Diorio IP Law Group to discuss how to protect your business's most valuable information.