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. 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. It is the software developer that usually requests for an escrow to protect and maintain their softwares.
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. This situation can be addressed by employing a source code escrow service.
Stipulations in Escrow Service
To apply a source code escrow, a software licensing agreement is employed and agreed on involving three parties: one or several licensors, one or several licensees, and the escrow agent.
The following are provided for 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.
Requiring the licensor to create updated versions of the software in specific intervals invoking the escrow.
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.
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 lastly, the required fees 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.