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An escrow agreement is essential where software is vital to any party’s business. A licensee should ensure that the software owner/licensor will make the source code available to the licensee by depositing it with an independent third party (an escrow agent) so that if the software owner/licensor goes out of business or is in material breach of its obligations, the source code is released to the licensee so that the software can continue to be supported. In this contract the deposited source code is checked (verified) to ensure it is the right software which the licensee is using. This contract is for a single licensee to sign. Read moreRead more



In the Explanatory Note to Contract 12, the concept and reason for escrow is described. As the practice of escrow has matured, the deposit of merely the software source code has been found to be insufficient for the purposes of securing the continuity of the end-user licensee’s or distributor’s investment. Therefore, more institutional licensees in particular are demanding the deposit of more information with regular updates and that all such deposits are verified to ensure that effective escrow arrangements are in place and upon which they can rely.

 Such licensees are no longer satisfied with the typical Escrow Agent of the early years; be that their lawyer, bank or trade association, which parties have no technical knowledge to verify the escrowed material; nor with the typical agreement with such parties which were drafted for the benefit of the Escrow Agent, negating any responsibility of knowing what is being held and minimising the Escrow Agent’s liability in the event that the deposited material, upon delivery to the end-user licensee in terms of the Escrow Agreement, turned out to be at best, out-of-date and at worst, unusable (see Contract 12).

 This contract is designed to protect the licensee who usually pays for the escrow service either solely or sometimes jointly with the Software Owner. The Escrow Agent is charged with the duty of ensuring the veracity of the deposited Data, and the Software Owner made liable for defective Data deposited. As a result, of course, the choice of Escrow Agent will be limited to a party or association with technical resources, therefore such is the reason for specialist escrow centres being set up to provide such a service. Although the cost of verification will increase the cost of escrowing Data, at least the licensee will be assured of receiving intelligible and usable Data in the event of and particularly in the circumstances of its release.