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. 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.
Differentiating Licensee to 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
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. This situation can be addressed by employing a source code 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.
These are the stipulations in source code escrow 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 finally, the fees to the escrow agent.
Who Can Qualify as 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.