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Understanding Source Code Escrow, Source Code, and Escrow Agents
In the computing world, all precious source code of an important software passes through what is termed as source code escrow, which simply means that the source code is deposited with the participation of a third party 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. An escrow agent, who is usually a lawyer, is a person, representing as third party, who holds the source code for safekeeping while a transaction is taking place or finalized or in cases where there’s need to resolve a disagreement with respect to the design or ownership patent of a software. Normally, the party licensing software (licensee) hires an escrow to protect and maintain their software.
Distinction 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 Need for Escrow
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. Therefore, a solution to this is to apply for an source code escrow services.
Stipulations in Escrow Service
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.
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.
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.
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.
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.
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 finally, the 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.
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