Practical and Helpful Tips: Programs

Understanding Source Code Escrow, Source Code, and Escrow Agents

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. It is the software developer that usually requests for an escrow to protect and maintain their softwares.

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.

The Need for Escrow

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.

Contract Provisions in Source Code Escrow

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.

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

Requiring the licensor to create updated versions of the software in specific intervals invoking the escrow.

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.

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.

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 lastly, the required 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.

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