Definitions of Source Code Escrow, Source Code, and Escrow

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. 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. The said escrow is normally requested by a party licensing software (licensee) to ensure protection and maintenance of the software.

Distinction between Licensee and 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. 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

Source code escrow always takes place in a agreement called software licensing agreement, involving at least three parties: one or several licensors, one or several licensees, and the escrow agent.

Below are the provisions in source code agreements.

Along with the software source code together with documentation, software tools or specialized hardware be independently maintained.

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.

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.

This stipulation may be included, known as non-compete clause, which forbids the licensee to employ the licensor’s staff as soon as the software is released.

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.