Source code escrow is a condition, in the computing world, wherein the source code of a valuable software is being deposited and entrusted with a third part 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. Escrow agents, who are usually lawyers, function as keepers of the source code and represent the third party while a transaction with respect to the source code of a particular software is being finalized or when there is a disagreement that is being resolved. Normally, the party licensing software (licensee) hires an escrow to protect and maintain their software.
Differentiating Licensee to Licensor
In extreme cases when the company or licensor fails to maintain and update the software as stipulated in the software license agreement or files for bankruptcy, the software source code will be released back to the licensee.
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. Perhaps, one measure to be able to use the software continually is for the company to obtain a copy of the updated version. Therefore, a solution to this is to apply for an source code escrow services.
Escrow and Its Agreements
Three parties are included in the application of a source code escrow where an agreement (software licensing agreement) is entered into – one or several licensors, one or several licensees, and the escrow agent.
The following are provided for in source code escrow agreements.
Along with the software source code together with documentation, software tools or specialized hardware be independently maintained.
Requiring the licensor to create updated versions of the software in specific intervals invoking the escrow.
Agreement to release the software source code by the escrow agent to the licensee in cases of bankruptcy of licensor, cancellation of a software development project, unwillingness of licensor to meet the contractual obligations.
After the release of the software source code, delineating the rights, obtained by the licensee, to modify the software for the purpose of correcting errors or to continue independent development of the software.
Imply that the duties of escrow agents are custody and verification of the stored source code software such that it is readable to a computer.
The contract may include what is called a non-compete clause, which prohibits the licensee to employ the licensor’s employees once the software is released to the licensee.
And finally, the fees to the escrow agent.
Before, lawyers were usually hired as escrow agents, but, nowadays, archives, museums and software communities are already considered to qualify as escrow agents.