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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

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.