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. In programming of softwares, normally a coding language is designed by the programmer and this is called the source code, which is further translated by a compiler or assembler into a binary machine code to make the code decipherable 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.
Difference between Licensee and Licensor
In cases where the company (licensor), who franchised the software, files for insolvency or fails to maintain or update the software as agreed upon in a software license agreement, the software source code will be released back to the licensee.
Employment and maintenance of a customized software is critical to many companies, such that they make sure that there is continuity of the software use even if the licensor is unable to continue. One way to achieve this is to obtain a copy of the updated version of the source code. It is in this situation where a source code escrow is needed.
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.
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.
Requirement for the licensor to constantly update the software and updating the escrow agent on it.
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.
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 the fee payments 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.