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Q) What does Escrow Mean?
Escrow means money, property, a deed, or a bond put into the hold or custody of a third party for delivery for a certain period of time, only after the fulfillment of the conditions specified.
Q) What is a software escrow?
Handing over the source code of programs written by a software developer to a third party called the escrow agent during the development process, on the terms of the agreement. If the vendor fails to live up to the agreement, software escrow ensures that the customer or end-user still has access to the source code for future development and maintenance.
Q) Who needs a software escrow, and why?
If the licensed user of a software product (a) receives only programming code, (b) the product is critically important to manage business activities, and (c) the product needs maintenance and ongoing development, then a software escrow is worth considering.
If a reseller contracts with its own customers to provide maintenance and development for a software product owned by someone else, then the reseller is advised to either have possession of source code or have the owner place it under escrow.
If an investor, financing the development of a software product, wishes to improve the quality of security, this can be achieved by a software escrow.
Q) What are the release conditions?
Where the software developer goes out of business or is declared bankrupt/insolvent or fails to meet the obligations of the source code. In typical software escrow agreement the release conditions are not always expected, but to maintain the continuity and reliability of the agreement, the required obligations are to be met.
Typical release conditions include:
- Insolvency of the developer
- Fall of the developer’s business
- Failure to meet the terms of the agreed license
- Death of key personnel
- Developer's acquisition by a key competitor
- Other
Q) What can be placed into an escrow account?
A typical escrow deposit consists of the source code escrow, related documents and the instructions for use. Besides this, it can also include:
- Computer hardware
- Designs
- Plans and process of developing the software
- Customer list
- Mathematical formulas, calculations
- Monetary information and much more.
Q) Can the supplier's or user's lawyer acts as escrow agent?
Yes, they can. But they need to act impartially as it might create potential conflict of interest which is not desirable.
Q) What kind of storage facility is needed and where the escrow should reside?
The source material is stored in vault a safety deposit box which is located at a legal jurisdiction from where quick access can be done if needed.
Q) Can one escrow cover several products?
Yes, and there is no reason to impose an additional charge. The supplier can delegate users to have escrow rights in only that software for which they have a license.
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