SKU: 15 Category:

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. This contract is for multiple licensees to sign a registration schedule to the Escrow Agreement to receive the benefit or the escrow arrangements and does provide for verification of the source code. Read moreRead more



In the Explanatory Note to Contracts 12 to 14, the concept and reason for a Software Owner to decide to enter voluntarily into an escrow arrangement for the benefit of its licensees is described. As was mentioned in the Explanatory Note to Contract 13, 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 licensees’ investment in using software which, quite often, is an integral part of its business. Therefore where the Software Owner’s end-user licensees are or are likely to be, for example, institutional licensees or large businesses in particular, the demand by such users will be for the deposit of more information with regular updates and that all such deposits are verified to ensure that the material deposited is in fact the source code and other relevant material relating to the software version which they are currently using and which is in sufficient detail for use by an independent programmer (if the need arises) to support, modify and enhance the software for so long as they wish to continue to use it.

 This contract is entered into by the Software Owner with its chosen Escrow Agent and is designed to protect all licensees who wish to register and pay a fee for the benefit of the protection that the source code will 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 or maintain the software to a proper operational standard.

 As escrow services have matured over the years, there are many independent third-party organisations which offer specific escrow arrangements. In the case of multi-licensee arrangements set up voluntarily by the Software Owner as in this particular Contract, the Escrow Agent is appointed by the Software Owner. The Escrow Agent is contracted to accept, verify and hold the source code until such time as the registered licensees’ licences have expired or have terminated or until the occurrence of certain specific events, usually the liquidation or material breach of the Software Owner, whereupon the Escrow Agent is authorised, upon certain conditions specified in the Escrow Agreement, to release the source code to the registered licensees.

 The purpose therefore of this Escrow Agreement is to provide for the terms of deposit of the source code, verification, payment and the conditions of its release to end-user licensees or its return to the Software Owner.

 Since verification of source code can be expensive, it may be agreed that the charges for verification are paid collectively by the licensees. This will be subject to negotiation so this Contract has not specified which party pays which fees. Even if the cost of verification may be paid by the licensees, at least the licensees will be assured of receiving intelligible and usable Data in the event of and particularly in the circumstances of its release.