Understanding 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. 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. Normally, the party licensing software (licensee) hires an escrow to protect and maintain their software.
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.
The Necessity of Source Code 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. Therefore, a solution to this is to apply for an source code escrow services.
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.
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.
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.
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.
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.
There is also a stipulation called non-compete clause which disallows the licensee from hiring the licensor’s employees after the release of the software.
And the fee payments to the escrow agent.
It used to be lawyers who were hired as escrow agents, but lately museums, archives and software communities have also become agents.