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SW013. ESCROW AGREEMENT (Single licensee - verification of Software deposited)


The source code of a software program is the detailed specification or "blueprint" of its creation, operation and functionality and without which a software programmer cannot readily understand the software for the purposes of modification, enhancement, "debugging", support or indeed, rectification of defects. The source code is not required for the normal commercial use of the program by an end-user.
The source code is therefore highly confidential and the owner of the copyright of the software will not wish to disclose the same to any end-user or distributor even though such parties have entered into an agreement or license with the software owner for use of the software.
However, if the software program is essential to an end-user or distributor's business, such end-user or distributor may require the software owner to arrange for the source code to be made available to them in the event that the software owner goes out of business or is in material breach of its obligations to support and maintain the software to a proper operational standard.
Such an arrangement is now commonly made with an independent third party, an Escrow Agent, appointed by mutual agreement of both parties. The Escrow Agent is contracted by the parties to hold the source code until such time as the parties' agreement or license has expired or

As the practice of escrow has matured, the mere depositing of the software source code has been found to be insufficient to assure the licensee that the deposited material is useable and up-to-date for the purposes of securing the continuity of the end-user licensee's investment in computerization. Therefore, more licensees (especially institutional organizations in particular), are demanding the deposit of more information with regular updates and that all such deposits are verified (ie checked by the escrow agent to ensure that it is useable and is the version which the licensee is using) to ensure that effective escrow arrangements are in place and upon which they can rely.
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