Defining Source Code Escrow, Source Code, and Escrow Agents
Any valuable source code of an important software should always be kept safe and protected by depositing it properly through a third party escrow agent and this state is known as source code escrow. The source code of a software is a programmed coding language especially designed by the programmer and which is further processed by an assembler or a compiler into a binary machine code which easily readable 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. The said escrow is normally requested by a party licensing software (licensee) to ensure protection and maintenance of the software.
Differentiating Licensee to Licensor
In situations where the licensor fails to commit its agreement of maintaining and updating the software or when the licensor files for insolvency, the software source code will be released to the licensee.
Necessitating Escrow Service
Many companies, who are dependent on a licensed software, do make a point of continually using it and maintaining 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. This situation can be addressed by employing a source code 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.
Below are the provisions in source code 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.
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.
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.
Comprehensive duty of escrow agent, such that it not only narrows down to custody of the software but includes verifying of the source code storage media as 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.
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.