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Why Escrow Services are a Necessity

Advancement in technology has made it very important for companies to take advantage of information technology solutions to improve business processes. As a result, companies have been licensing software from different developers. Most application software are very expensive, and both the licensor and the licensee want to protect their technology. For this reason, software vendors use escrow services to protect their interests as well as those of the licensee. With source code escrow, the developer is able to store the source code with a third party. The escrow agent is the third party in this case, and he is supposed to impartial so as to ensure the rights of both the licensor and the licensee are guaranteed. Either the buyer or software vendor can introduce the escrow agreement to protect their interests.

Software exists in two formats namely the object code format and the source code format. As a licensee, you only get the object code format while the escrow gets the source code for safe keeping. Deposing the source code with the escrow agent ensure that the software is updated and maintained on a regular basis. This is very important for the licensee since the software may be a key part of their business and this cushions then from possible losses. In the case of bankruptcy of the developer, the escrow agent makes sure that the software keeps running by providing the source code to the licensee. Under the escrow agreement, the developer, has the responsibility to maintain and offer support to the licensee based on the agreed terms and if this is not fulfilled, the licensee has the right to acquire the source code.

Besides protecting the rights of the licensee, the escrow agreement is key to protecting the intellectual property of the developer. There are so many people out there who are out to copy the ideas of different developers, and this makes it hard for the developer to surrender the source code to the licensee. The software escrow agreement has various terms and conditions that bind both the developer and the licensee. Both the licensor and the licensee have various obligations which they are required to fulfill. Failure to fulfill these obligations there are serious consequences. The source code escrow agreement outlines possible use or transfer of the source code which is key in protecting the rights of both parties.

Apart from storing the source code, the escrow agent has to authenticate the source code. There is also the need to ensure that the software is working as it should and thus the escrow agent has to verify this. When the licensee will be using the software for an activity that is vital to the company or has a direct impact on the revenue, it is important to use source code escrow services. Also, when the price of the software is very high, it is only best to protect the investment with the use of an escrow service.

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