Friday, December 09, 2005

Software Escrow - The General Guide Lines

While the basic outline of a software escrow may sound simple, it turns out that these are relatively complex deals. While many of the companies that handle escrows have model agreements on the Web, which make for a good starting point and certainly an improvement on reinventing the wheel, the key word is model agreement.

Every deal is different. As many of these as I've done, I've never had two deals that used the same escrow agreement. There are traps for the unwary and inexperienced throughout the process. Many issues will be the subject of often intense negotiation. As you delve into this area, you'll find that many areas of the law are implicated including bankruptcy and intellectual property law. Do it wrong and a bankruptcy court may prevent the release from escrow although you have an agreement that would appear to require it. Mess up on the intellectual property side and you may find out that you don't have the license you need to do what you thought you could with the source code once you have it.


Here are three quick tips on doing this right.

Make sure that your agreement requires them to promptly deposit revised source code once they release a new version. It won't be pretty if you get the source code for version 1.0 when you're using version 4.1. You have to ensure that somebody in your organization is responsible for monitoring these future deposits.

The second thing you need to do is verify that they've escrowed everything that is supposed to be escrowed and that the CD-ROM or other media is holding what it purports to be holding. I would suggest to you that once you get the source code released from escrow is not the time to find out that the escrowed CD-ROM has a video game, but not your software.

To verify, you'll need to have an agreement with your developer to have a trusted third party work with the source code to confirm that it is what it purports to be and that it's complete. Escrow without verification is a "No Win" situation. The problem with verification is that it can be expensive.

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