Essentially, software escrow is the lodging of source code (the human-readable version of software applications) by a software supplier or reseller with an agent under the terms of an escrow agreement, for the benefit of nominated licensees.
The escrow agent typically receives sealed CD-ROMs verified by the supplier to contain the source code of the licensed program(s).
These are lodged in secure storage (Ideally the Escrow agents facility) and lodgment details registered and notified to licensees.
This process is repeated each time the supplier issues an upgrade.
The program’s object code (machine-readable version) and often other information such as flow-charts and data layouts necessary for developers to understand and modify the software will also be included in the escrow.
The escrow agreement normally stipulates that if the supplier goes out of business, or breaches a court order to meet contractual obligations under the license such as maintenance, support, development and supply of upgrades, the licensee may demand access to the source code for limited purposes.
This generally means the right to make a backup copy, maintain, correct and keep the program basically operational.
Escrow arrangements are confidential, and no intellectual property rights in the software ever pass to a licensee when escrow rights are exercised.
Where a dispute arises between the parties to the escrow, the escrow agent must remain strictly impartial. Arbitration is the preferred method of resolution of such disputes.
Not every business needs a software escrow, but unless source code is supplied with the run-time version under the license, an escrow is vital for customized software such as that used by accountants, lawyers, doctors, dentists, architects, engineers and real estate agents.
These types of service providers tend to rely on sophisticated enterprise applications both to support their clients and run their own businesses, and prudent auditors will want to see a software escrow in place before signing off their accounts.
Software suppliers can provide for an escrow as an itemized cost under the license, price dependent on service level and risk factors for the escrow agent.
Licensees may not welcome an additional overhead, but would be wise to regard software escrow as a cheap and practical form of insurance for key business assets.
For more information on source code or Software Escrows, please feel free to mail us at info@escrowtech.in
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