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 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.
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?
At EscrowTech, we believe source code escrow agreements should never be static or one-size-fits-all. As technology changes, we change along with it. Thus, a source code escrow agreement from EscrowTech is always 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.
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Is Software Escrow the Same Thing as 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.
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Frequently Asked Questions About Source Code Escrow
What is source code escrow, and why do companies use it?
Source code escrow is a legal arrangement that stores critical source code with a trusted third party. Companies use it to keep operations running if a licensor fails to support their software. When a trigger event occurs, the licensee gains access to the code needed to maintain or repair the application.
How does a source code escrow agreement work?
A source code escrow agreement outlines deposit requirements, update schedules, and release conditions. The licensor places source code in escrow, and the licensee receives access only if specific trigger events occur. This structure protects the licensors IP while giving the licensee continuity and confidence.
What does it mean to put source code in escrow?
Putting source code in escrow means placing code and related materials with a secure third party. The escrow agent protects the deposit until a contractually defined trigger event occurs. If that happens, the licensee can access the code to maintain essential software without disruption.
When is source code released from escrow?
Source code is released when the licensor meets a trigger condition such as bankruptcy, failure to support the software, or product abandonment. These conditions are defined in the source code escrow agreement so both parties understand exactly when the release will occur.
What should be included in a source code escrow deposit?
A deposit should include source code, build instructions, documentation, and any tools needed to compile or maintain the software. These materials ensure the licensee can continue operations if the code escrow is released after a trigger event.
Is source code escrow necessary for SaaS applications?
Yes. SaaS applications also benefit from escrow protection because the licensee depends on hosted infrastructure controlled by the licensor. A SaaS escrow arrangement can include source code, data, deployment scripts, and hosting instructions to keep the application operational if support is disrupted.
How often should licensors update source code in escrow?
Update frequency depends on the agreement but is typically tied to major releases or periodic update cycles. Regular updates ensure the source code in escrow matches the current production environment so licensees can maintain the software effectively during a trigger event.
What is the difference between software escrow and source code escrow?
Software escrow often includes more than source code. It can contain data, documentation, and other materials needed to run or rebuild the application. Source code escrow focuses on protecting the core code itself. Both protect business continuity through conditional release events.
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.
Discover what our team of legal experts can do to ensure seamless continuity for your business.
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