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What Has Changed Recently With Software?

Understanding 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. 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. Normally, the party licensing software (licensee) hires an escrow to protect and maintain their software.

Distinction 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.

The Need for Escrow

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.

Escrow and Its Agreements

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.

These are the stipulations in source code escrow agreements.

The subject and scope of the escrow, which, respectively, refers to the software source code and the requirements of the licensee, require for independent maintenance of the following: documentation, software tools or specialized hardware.

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

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.

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.

Comprehensive duty of escrow agent, such that it not only narrows down to custody of the software but includes verifying of the source code storage media as 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 the fee payments to the escrow agent.

Kinds of Escrow Agents

Before, lawyers were usually hired as escrow agents, but, nowadays, archives, museums and software communities are already considered to qualify as escrow agents.