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.
Distinction between Licensee and 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 Necessity of Source Code Escrow Service
Companies, who have gained a lot and are dependent on the customized software, will ascertain that there is continuity of use and maintenance of it even if the licensor is unable to do so. 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.
That the software source code be equally, as well as independently, maintained with the documentation, software tools or specialized hardware.
The licensor is obliged to put up updated versions, at a specified period, of the software in the knowledge of an escrow agent.
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.
After the release of the software source code, delineating the rights, obtained by the licensee, to modify the software for the purpose of correcting errors or to continue independent development of the software.
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.
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.
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.
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