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Who’s who in a software escrow agreement?

We use the following terms interchangeably throughout this article:

The licensor is typically a software developer or vendor who deposits source code and other materials into escrow. They're also referred to as the depositor. The client, or the authorized end-user, is typically  referred to as the beneficiary or licensee. A neutral third party, such as Codekeeper, typically serves as the escrow agent, providing secure storage of the source code and other materials, and making available (releasing) the contents of an escrow account to its beneficiary (or, beneficiaries) — upon a release condition being met.

 

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During renegotiation of their licensing agreement, the client might request that the system in question be deposited into escrow. Should any adverse, unforeseen event take place, the client will be able to retrieve the valuable code and IP, and resume operations as usual.

These smaller development teams can also use software escrow as a selling point for their services, reassuring potential clients that if anything happens to the firm, the IP is secure in storage, up to date, and ready to be released once a trigger event takes place. 

 

If you’re thinking about outsourcing your development, you must surely be wondering about how to keep your data secured.
Data breaches are a real danger that can lead to fines and a damaged reputation. It's very important to understand how your data is being handled by everyone you work with, especially when working with agencies in different countries where the laws may differ.

This article gives you six tips on securing your development outsourcing. These tips include protecting your intellectual property (IP), asking about security certifications, limiting privileges, forming an airtight agreement, and preventing breaches.

 

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You can then discuss intellectual property policies with your selected agency. You will want to make sure they understand the laws and that they follow the rules.
Ask about their security measures around intellectual property protection. For example, do their employees sign non-disclosure agreements (NDA)? The agency should be able to provide these details in-depth. If not, take it as a red flag. You can also discuss discrepancies and have your lawyer add this to your contract.

The agency should be able to provide these details in-depth. If not, take it as a red flag. You can also discuss discrepancies and have your lawyer add this to your contract.

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What is a software or source code escrow agreement?

If you’re a SaaS company and you’ve been in business for a few years now, you may have already come across a prospective business partner who was pretty insistent on the inclusion of a software or source code escrow agreement as part of the license terms. Eager to close the deal you’ve been negotiating laboriously for weeks or months, you now need to figure out how to give your client what they want while finding a way to save resources, whether it’s time or money.

If, on the other hand, you’re a company looking to gain a competitive advantage by using new technology and automating your business processes, you may be outsourcing the development of said technology (i.e., software application) to an emerging software company. If that company is not quite established or profitable yet, you may now be considering minimizing the risk for your own company by implementing a software escrow agreement.