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. 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. 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. Normally, the party licensing software (licensee) hires an escrow to protect and maintain their software.
Distinction between Licensee and Licensor
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.
The Need for Escrow
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. 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
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.
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.
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 lastly, the required fees to the escrow agent.
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.
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