Source code escrow (or software escrow) is a complex, but important concept. If your business is dependent on custom-developed software (or data), you should consider placing it in safekeeping – in escrow. That would be a prudent risk management practice, and would greatly reduce your company’s risk exposure and safeguard the continuity of your day-to-day business operations that are dependent on that software.
Escrow is a well-known concept that is used in different contexts. For example, you get domain name escrow and trade escrow. Each involve a seller, a buyer and an escrow agent. Source code escrow involves the same principles, but you have an intellectual property owner, a user and an escrow agent. Even data, a server or a Software as Service (or SaaS) can be kept in escrow.
Source Code Escrow or Software Escrow Agreement
The source code of a business application is lodged with an independent and neutral escrow agent according to the terms and conditions set out in an escrow agreement signed between the software vendor, the software licensee and the escrow agent. The terms of this agreement will specify the exact legal terms upon which:
- the software vendor is obliged to deposit the source code,
- the software licensee may call for the release of the source code, and
- the escrow agent must act in the event of any dispute or legal action.
How do the parties benefit?
Safeguard the continuity of your day-to-day business operations
By entering into an escrow agreement, the potential for risk or dispute is reduced in that the escrow agent takes up a neutral and independent position that simultaneously ensures that the software vendor’s copyright and intangible assets are respected, whilst at the same time providing the licensee with the protection they need.
Actions you can take
- Understand issues relating to source code escrow by consulting with us.
- Find the right escrow agent with our help. We have worked with many in the past.
- Manage your escrow agreement by instructing us to review, draft or negotiate them for you.
- Instruct us to help you with the related IT Contracts.
