Definitions of Source Code Escrow, Source Code, and Escrow
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. A source code is a special, coding language designed by programmers in the process of developing a type of software, wherein the source code is later transformed by a compiler or an assembler into a binary machine code in order to be understood 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.
Difference 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.
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. One way to achieve this is to obtain a copy of the updated version of the source code. Therefore, a solution to this is to apply for an source code escrow services.
Escrow and Its Agreements
Source code escrow always takes place in a agreement called software licensing agreement, involving at least three parties: 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.
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.
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.
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 lastly, the required fees to the escrow agent.
Kinds of 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.