> "How do we protect ourselves against a competitor doing this?"

You can try patenting; but not after the fact. Copyright won't help you here. You can't copyright an algorithm or idea, just a specific form or implementation of it. And there is a lot of legal history about what is and isn't a derivative work here. Some companies try to forbid reverse engineering in their licensing. But of course that might be a bit hard to enforce, or prove. And it doesn't work for OSS stuff in any case.

Stuff like this has been common practice in the industry for decades. Most good software ideas get picked apart, copied and re-implemented. IBM's bios for the first PC quickly got reverse engineered and then other companies started making IBM compatible PCs. IBM never open sourced their bios and they probably did not intend for that to happen. But that didn't matter. Likewise there were several PC compatible DOS variants that each could (mostly) run the same applications. MS never open sourced DOS either. There are countless examples of people figuring out how stuff works and then creating independent implementations. All that is perfectly legal.