Short Course on Software – Covering The Basics

Defining Source Code Escrow, Source Code, and Escrow Agents

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. In programming of softwares, normally a coding language is designed by the programmer and this is called the source code, which is further translated by a compiler or assembler into a binary machine code to make the code decipherable by the computer. To protect a valuable source code of a software, this procedure is normally entrusted to a third party called an escrow agent, who is a lawyer and who holds the source code while a transaction is being finalized or that a disagreement is being resolved. It is the software developer that usually requests for an escrow to protect and maintain their softwares.

Difference 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

Employment and maintenance of a customized software is critical to many companies, such that they make sure that there is continuity of the software use even if the licensor is unable to continue. To be able to use the software continuously, the company can obtain a copy of the most updated version of the source code. Therefore, a solution to this is to apply for an source code escrow services.

Stipulations in Escrow Service

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.

These are the stipulations in source code escrow agreements.

The subject and scope of the escrow, which, respectively, refers to the software source code and the requirements of the licensee, require for independent maintenance of the following: documentation, software tools or specialized hardware.

Requirement for the licensor to constantly update the software and updating the escrow agent on it.

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.

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.

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 the fee payments to the escrow agent.

Who Can Qualify as Escrow Agents

Normally, a notary lawyer plays the role of escrow agent, but in recent developments even museums, archives, and software communities have been solicited to be one.