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Defining 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. 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. The said escrow is normally requested by a party licensing software (licensee) to ensure protection and maintenance of the software.

Distinction between Licensee and 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 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. To be able to use the software continuously, the company can obtain a copy of the most updated version of the source code. Therefore, a solution to this is to apply for an source code escrow services.

Escrow and Its Agreements

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.

The following are provided for in source code escrow agreements.

That the software source code be equally, as well as independently, maintained with the documentation, software tools or specialized hardware.

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.

A stipulation to allow the licensee to fix errors in the software or further develop the software once it is released back to the licensee.

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.

Escrow Agents

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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