Definitions of Source Code Escrow, Source Code, and Escrow
Source code escrow is a condition, in the computing world, wherein the source code of a valuable software is being deposited and entrusted with a third part escrow agent. 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. The said escrow is normally requested by a party licensing software (licensee) to ensure protection and maintenance of the software.
Differentiating Licensee to 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.
Necessitating Escrow Service
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.
Contract Provisions in Source Code Escrow
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.
Requirement for the licensor to constantly update the software and updating the escrow agent on it.
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.
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.
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.
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