What is software escrow? An attorney-client relationship can be very complex and ambiguous, particularly in the area of patents and software development. Thus, there arises a need for a third-party mediator to mediate this relationship in order to make sure that both sides get what they are looking for. A software escrow service is just such a mediator. However, what is software escrow exactly and why would anyone want to use it?
A software escrow service is an agency that help protect all participants in a software development contract by having a third party hold the intellectual property, source code, and other documentation until a mutually-agree-upon event happens. The software developer creates the product or application, the buyer creates the consumer demand, and the seller delivers the end-user software. In a nutshell, the seller provides the end-user software (the thing that the buyer uses to run the computer) and the buyer provides the money. Somewhere between there and the actual delivery of the product (typically on schedule and on budget) comes the time-sensitive software code or other materials that must be protected from accidental misuse. The need for such a business continuity solution arises from the fact that even though the purchaser and developer may have come up with the same idea for the product, each is in different places with respect to the delivery.
The seller can be anywhere in the world while the buyer can be in her hometown.
Because of this, the escrow technician must make sure that all of the necessary paperwork regarding the creation and delivery of the product meets the stipulated contractual requirements. This is the essence of software “escrow.” If any of these parties involved in the creation and delivery of the product do not meet the contractual requirements, then the product cannot be delivered. The proper use of technology in this type of situation is to require that the escrow service or company to perform a risk management analysis of the entire process before actually delivering any materials to the customer.
As the seller, you have to make sure that the legal expertise and the technical expertise are both up to date. You have to be sure that the purchaser is aware of all the elements of the contract. In addition, you have to make sure that the technical information is current and available. If it isn’t, then you may find that some of the aspects of what is software escrow can become problematic. By requiring all of these aspects of the transaction to be current and available at all times, the escrow vendor can alleviate risks and ensure that the transaction goes as expected.
From a legal perspective, what is software escrow is also something you want to consider. Consider the fact that a typical licensing agreement typically includes provisions regarding the maintenance of copies of important software. For example, a license may provide that the licensed user may make one copy of the software and retain a non-exclusive license to use, sell, repair, convert, compile, or distribute the software. In addition, most clauses typically specify that the licensed user must notify the licensee if it is made available for download to anyone other than the designated user or that the licensor has the right to remove copies of the software from the internet.
The most common types of escrows in a software development environment are through virtual machines and source code escrow.
A virtual machine escrow occurs when an individual developer creates virtual machines that will act as a model of the final software system that will be manufactured. In other words, virtual machines often include a large number of different programming languages and source code that are the building blocks of the final system.
Most companies that produce software also create a series of manuals and documentation that describe in greater detail all of the processes involved. In addition to the manuals, many companies also require developers to prepare a set of spec sheets that explain in greater detail the software and how it works. Software escrow in this sense is considered to be a prerequisite of the software development process. Many sources believe that this requirement may actually serve to foster an illusion of how well a product or system truly works and discourage potential customers from taking their business elsewhere. While software escrows may seem unnecessary, they are actually very important.
A software escrow company usually maintains files pertaining to the licensed software.
Such documents would include such things as licensing terms, technical notes, and assignment/destruction notices. In some cases, a licensor will provide an in-house software escrow tech to ensure that all of these materials are properly maintained. However, many businesses prefer to outsource this duty to a third party firm. Regardless of where a company chooses to contract out this duty, there are several benefits to hiring an in-house escrow technician.