Study: My Understanding of Options

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. 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. 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 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

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. This situation can be addressed by employing a source code escrow service.

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.

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.

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

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.

An agreement that when the software source code is released back to the licensee, he/she has the right to fix errors in the program or modify by independently developing further the software.

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 finally, the fees to the escrow agent.

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.