How I Achieved Maximum Success with Companies

Definitions of Source Code Escrow, Source Code, and Escrow

In the computing world, all precious source code of an important software passes through what is termed as source code escrow, which simply means that the source code is deposited with the participation of a third party escrow agent. A source code is a special, coding language designed by programmers in the process of developing a type of software, wherein the source code is later transformed by a compiler or an assembler into a binary machine code in order to be understood by the computer. An escrow agent, who is usually a lawyer, is a person, representing as third party, who holds the source code for safekeeping while a transaction is taking place or finalized or in cases where there’s need to resolve a disagreement with respect to the design or ownership patent of a software. Normally, the party licensing software (licensee) hires an escrow to protect and maintain their software.

Distinction between Licensee and Licensor

In cases where the company (licensor), who franchised the software, files for insolvency or fails to maintain or update the software as agreed upon in a software license agreement, the software source code will be released back to the licensee.

Necessitating Escrow Service

Companies, who have gained a lot and are dependent on the customized software, will ascertain that there is continuity of use and maintenance of it even if the licensor is unable to do so. One way to achieve this is to obtain a copy of the updated version of the source code. It is in this situation where a source code escrow is needed.

Contract Provisions in Source Code Escrow

To apply a source code escrow, a software licensing agreement is employed and agreed on involving three parties: one or several licensors, one or several licensees, and the escrow agent.

The following are provided for in source code escrow agreements.

That the software source code be equally, as well as independently, maintained with the documentation, software tools or specialized hardware.

The licensor is obliged to put up updated versions, at a specified period, of the software in the knowledge of an escrow agent.

Instruct that the software source code be released to the licensee by the escrow agent on the following conditions: bankruptcy of licensor, cancellation of a software development project, unwillingness of licensor to meet the contractual obligations.

A stipulation to allow the licensee to fix errors in the software or further develop the software once it is released back to the licensee.

Specify clearly the duties of an escrow agent which involves custody and verification of the stored source code software if it is readable to a computer.

There is also a stipulation called non-compete clause which disallows the licensee from hiring the licensor’s employees after the release of the software.

And finally, the fees to the escrow agent.

Kinds of Escrow Agents

It used to be lawyers who were hired as escrow agents, but lately museums, archives and software communities have also become agents.