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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. 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. 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. It is the software developer that usually requests for an escrow to protect and maintain their softwares.

Difference 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.

Necessitating 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. This situation can be addressed by employing a source code escrow service.

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.

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.

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.

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.

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