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. In programming of softwares, normally a coding language is designed by the programmer and this is called the source code, which is further translated by a compiler or assembler into a binary machine code to make the code decipherable 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.
The Necessity of Source Code 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. One way to achieve this is to obtain a copy of the updated version of the source code. This situation can be addressed by employing a source code escrow service.
Stipulations in Escrow Service
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.
Below are the provisions in source code agreements.
Along with the software source code together with documentation, software tools or specialized hardware be independently maintained.
Requirement for the licensor to constantly update the software and updating the escrow agent on it.
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.
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.
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 lastly, the required fees to the escrow agent.
Kinds of Escrow Agents
It used to be lawyers who were hired as escrow agents, but lately museums, archives and software communities have also become agents.