You must research software escrow if you are considering hiring a company to acquire source code or store documentation.
They have specific release conditions; if you understand them correctly, you could save yourself many headaches. In addition, they have multiple benefits; once you read them, you will surely hire a company.
What does a software escrow consist of?
North American companies mostly use this agreement. Software escrow differs from basic escrow in that you are no longer selling but renting using a source code or taking care of documentation.
The agreement includes a software developer, the person interested in obtaining the source code and the company specializing in escrow. The interested parties usually range from lawyers to other professionals who wish to use a computer program.
In addition, the agreement includes certain obligations and predefined release conditions that each party must fulfil.
The escrow-type is used to provide peace of mind to the beneficiary. On the other hand, it seeks to assure the buyer that if the software developer does not want to support it in its source code, he will still be able to access it through the company.
What are the types of software escrow contracts?
Knowing the types of contracts will help you choose the one that best suits your interests. Regardless of your choice, the interested parties must sign a draft software escrow agreement, so you should know what they consist of.
They are divided into one-to-one, many-to-one and one-to-many. The one-to-one agreement between the party interested in acquiring the software and the developer. An agreement is often signed between several interested parties and a developer, usually a large company.
Finally, one-to-many is signed by one interested party and several developers. In these cases, the user is usually a large company.
In addition to signing one of these contracts, the parties must sign the software custody contract. This contract considers the possibility that the escrow business may fail. In these agreements, both parties interests are usually considered.
What are the software escrow release terms?
North American agreements usually include the following conditions. However, they can sometimes be modified.
- The software developer becomes bankrupt: Some jurisdictions allow for “creditor protection” in the bankruptcy process. The facilitator could spend months or years trying to get out of bankruptcy, so depending on the country’s bankruptcy statutes, the agreement could be terminated.
- The developer ceases to operate: This condition applies if the developer has no office to operate from, loses some of its staff or stops responding to emails and calls.
- The provider does not comply with the licensing terms: This will depend on the terms of each company.
- Finally, there is the discontinuation of the software or a change in the ownership or structure of the vendor. This last condition is because the new owner could be a company with which you did not have a good experience before or do not share the same interests.
If one of these release conditions is met, the user can demand that the company hold the software release the source code. However, the developer could dispute this condition.
What should I consider when selecting an escrow company?
One of the most important points to consider is the jurisdiction since, if legal problems arise, they will be solved through the laws to which the agreement is subject.
If the opposing party is located abroad, bear in mind that legal proceedings will be costly if this jurisdiction is chosen.
Have secure storage because this is where the material provided by the software developer will be kept. They must have access control and fire protection so the data is not lost.
Inspections and verification of the security deposit must be carried out to ensure the correct functioning of the data received. Finally, it is ideal to have an agreement on rates and communication throughout the process to ensure the parties’ best interest.