Can't the Feds just take the drive to the software company and order them to decrypt the files or is that illegal?
Encryption is a code that is unique to each file/machine that is encrypted. The code is unknown to anything/anybody outside of the encryption program on the computer in question. In order to break the code, anybody, including the software manufacturer, would have to guess the password; practically speaking it is impossible to decrypt modern encrypted files. If a password is sufficiently long and is not just English words, it is, for practical purposes, impossible to guess.
Almost literally, a harddrive that is boot encrypted and has a 30 character password is a paper weight without the password.
Of course, the software manufacturer could always have a "backdoor" built in, but that would be very very bad for business if it ever came to light, and, for open coded programs, the backdoor would be discernible.