Every business relies upon mission-critical software to maintain its day-to-day operations. In the best-case scenario, businesses shouldn’t have to think about this software at all. The licensor should maintain and update it regularly, fixing bugs and making adjustments to keep up with industry trends.  

What would you do if, suddenly, the licensor went out of business? They might leave your business without access to the critical source code that keeps your operation afloat.  

That is why major businesses and corporations rely on source code escrow. It is the key to security, business continuity, and peace of mind. 

What is source code escrow? In essence, it is like a legally binding insurance policy. Code escrow allows licensees to gain access to source code when licensors meet specific trigger conditions.  

We’ve created this guide to expand on the intricacies of this type of legal agreement. We’ll explain why the world’s largest corporations rely on source code escrow every day. Continue reading to learn more about how to protect your company’s mission-critical software. 

What Is The Primary Purpose of Source Code Escrow?

The primary purpose of source code escrow is to protect both licensors and licensees. Source code escrow comes into play in the event of an adverse event impacting the licensing party.  

For example, a software or SaaS licensor might file for bankruptcy or go out of business. As a result, the licensor would cease to update or maintain the software or application.  

This becomes problematic for licensees in the event of bugs or broken code. Furthermore, it would be difficult for licensees to keep up with changes in the industry. Often, these changes require new or updated tools. 

In essence, the software would become static. When it “breaks,” it may become obsolete. The licensee’s internal programmers or engineers cannot fix or update the technology without access to its source code.  

A smiling programmer works on source code on dual monitors
A smiling programmer works on source code on dual monitors

What Is the Benefit of Source Code Escrow?

In a source code escrow agreement, licensors place source code in escrow. The source code or other deposit materials are held securely by the escrow agency. Thus, the licensee can gain immediate, seamless access to the source code after a designated trigger event.  

There is no ownership transfer in this type of agreement. The licensor will maintain full ownership of their IP. Likewise, licensors gain peace of mind by knowing precisely which licensees have access to their code.  

At the same time, licensees reap the benefit of continuity. With access to the source code, their internal programmers can continue to fix and update mission-critical applications. There is no need to find alternate software solutions, train staff on new technology, or compromise client trust.  

The legal protocols in place dictate how often licensors must update the source code or other deposit materials. All such materials, including code, are kept in two-location, offsite secure data facilities. This security provides peace of mind for all parties involved.  

What Is a Source Code Escrow Agreement?

Your source code escrow agreement should not be static or one-size-fits-all. As technology changes, escrow agencies must change along with it. Thus, a source code escrow agreement is a fully customized legal document. It addresses the specific needs or concerns of both parties.  

Your escrow agreement will dictate the qualifying trigger events that lead to the release of the source code. It will include the frequency of updates to deposit materials and expand upon the protocol for their release.  

There are opportunities to customize your agreement in the event there are multiple beneficiaries or licensors involved. 

Is Software Escrow the Same Thing as Source Code Escrow?

Technology is in flux. Thus, contemporary escrow agreements must account for a variety of new and unique applications.  

In code escrow, the deposit materials held in escrow include source code. Software escrow often includes source code, data, and documentation. Your agreement might also dictate the inclusion of other deposit materials necessary for maintaining the associated software. In most cases, the terms “software escrow” and “source code escrow” can be used interchangeably.  

Today, we often use the term “technology escrow” to cover a wide range of technology, licenses, and technology deals. Agencies hold everything from chemical formulas to encryption keys in escrow.  

Likewise, SaaS escrow can help protect IP and assets related to SaaS applications.  

Keep Source Code Secure With EscrowTech

Your mission-critical software is the beating heart of your company. Investing in a source code escrow arrangement means protecting vital technological infrastructure. Holding source code in escrow means it will be accessible and up to date in the event of a trigger event. It is the key to seamless continuity, even for Fortune 500-level corporations.  

At EscrowTech, we help businesses of all sizes secure their most essential digital and technological assets. Our agreements are always flexible and customizable, ensuring you get the tailored security your business deserves.  

Schedule a consultation today. You’ll discover what our team of legal experts can do to ensure seamless continuity for your business.  

author avatar
Jorge Sagastume
Jorge Sagastume is a seasoned professional with over two decades of experience in the software escrow industry. As the President of EscrowTech International, Inc., he has demonstrated a profound expertise in navigating the complexities of software escrow agreements and intellectual property management. His leadership has been instrumental in solidifying EscrowTech's reputation as a trusted and reliable partner in the tech industry. Jorge's commitment to excellence and his passion for delivering top-notch service are reflected in the long-standing relationships he has built with clients and partners alike