Several recent articles have covered the software escrow issue, including the following from PC World http://www.pcworld.com/businesscenter/article/151850/the_it_workers_wall_street_meltdown_worry_list.html, saying that “The bottom line is that you need to make sure that you can get a hold of the source code if that company goes under and ensure that it is the correct version and is valid.” 

EscrowTech is the leading Software Escrow agent in the country, with offices in India as well.  Please see the related blogs and visit www.escrowtech.com for more information about Software Escrows and Technology Escrows.

Phone: 801-852-8202    email: mail@escrowtech.com    website: www.escrowtech.com

This blog is dedicated to the explanation and exploration of Software Escrows and Source Code Escrows.  Much of this is taken from the article “Doing Software Escrows Right” published in the Computer and Internet Lawyer.  The author, Jon Christiansen, is not only a recognized computer law expert, but is also one of the founders of our company, EscrowTech International, Inc.  A full copy of the article can be found here http://escrowtech.com/article.php

Are software escrows useful?  How do you do a software escrow right?

Although software escrows have been used since the 1970’s, they are an increasingly common practice. Today, most software lawyers deal with them occasionally, if not frequently. 

A software escrow protects a software licensee by ensuring that the licensee will have access to the source code in the event that the licensor goes out of business, discontinues support of the licensed software, breaches maintenance obligation, or some other release condition occurs.  Typically, the parties use a software escrow when the license is for the object code (binary form) of the software, but the licensee does not receive the source code and therefore is unable to maintain, update, or enhance it.  The licensee is dependent on the licensor for maintenance, updates, and enhancements to the software.  Simplistically, a software escrow can be described as the following:

1. The licensor delivers a copy of the source code to a software escrow agent.

2. The software escrow agent holds the source code.

3. The software escrow agent releases the source code to the licensee only if a release condition occurs.

4. The software escrow agent returns the source code to the licensor if the escrow terminates without the occurrence of a release condition.

Sometimes software escrows are referred to as technology escrows.  For clarification, software escrow are a subset of technology escrow.  Some technology escrows do not involve software or source code.  For example, technical documents, chemical formulas, prototypes, drawings, and other embodiments of intellectual property can be held in a technology escrow.

1. Request the appropriate Agreement and forms from an EscrowTech representative by calling 801-852-8202 or email us at mail@escrowtech.com.

The following processes can be expedited by sending PDF copies via email or fax.

A. Single Beneficiary Software Escrow Agreement

a. Once you have reviewed and filled out the Agreement, print off at least one copy, sign it, and fax/email PDF a copy to the other party. Ideally, three original copies should be mailed through the loop for signatures so that all three parties can have an original.

b. The other party will then sign the originals and mail them to EscrowTech at the following address:

EscrowTech International, New Accounts, 333 S 520 W, Suite 230, Lindon, UT 84042

c. Once EscrowTech receives a copy signed by both parties, an account manager will process the Agreement immediately and set up the Software Escrow to receive a Deposit. At that point, you will receive instructions and froms to make a Deposit.

B. Multiple Beneficiary Software Escrow Agreement

a. Review the Agreement and fill out the front page and Exhibit A. Also, verify that Exhibit B regarding Release Conditions is acceptable to both parties. Once you have reviewed and filled out the Agreement, print off at least one copy, sign it, and fax/email PDF a copy to EscrowTech to be fully executed and set up. Ideally, two original copies should be mailed to EscrowTech so that both parties can have an original.

b. An EscrowTech account manager will process the Agreement and contact you same day.

c. The next step is to fill out the Beneficiary Registration form. Input the Escrow No. given to you, your company information and contact person, reference your license with the client, input the product name next to its number (in a separated products Agreement), and choose the release conditions that you want to use from the sample language at the end of the form. You may need to have them approve the form before signing, but once you sign it go ahead and have your client sign it and send to EscrowTech. The other party should receive a copy of the master Agreement for their reference.

d. Once EscrowTech receives a copy signed by both parties, and account manager will process the Agreement immediately and set up the Software Escrow to receive a Deposit. At that point, you will receive instructions and forms to make a Deposit.