Code Escrow Agreement

2007-03-08 10:33:40

( Business )



A computer software program needs certain commands in order to run and interact with other programs and data. These commands which can be referred to as an object or executable code, is only understood by a computer, and not readable by humans. In order for the code to be understood by a technical person, a source code is created and integrated into the software program.

It is the source code that is referred to when one needs to repair the computer program. By analyzing the code, one can investigate the problem and make changes to the source code; however, when one changes the commands in the source code, it also needs to make changes on the object code by converting it from the source code in order for the software to operate.

Anyone purchasing a software program, especially when it is a customized software program, usually ask for some form of guarantee that in the event something goes wrong with the program, the developer will become available to make repairs, or update the software. There are instances when the developer may become permanently unavailable, becomes bankrupt or closes their business. For this reason, most buyers of customized software programs request that the source code and program documentation be released to them so that they are able to seek alternative assistance should maintenance to the program be needed. The developer is usually hesitant to release the source code, as it contains proprietary information that maps out the entire computer program including how the program works.

As a result, both parties turn to a code escrow or a software escrow agreement. This type of agreement requires the developer to deposit the source code and the program documentation to a third party who will keep these items and release the source code when it meets certain conditions under the agreement.

A code escrow or software escrow agreement provides information on the items that will be deposited to the escrow agent. Aside from the source code, system documentation is normally deposited to allow a trained technical person to make necessary repairs independently.

The frequency of deposit for which software modifications are submitted should also be indicated on the agreement.

The verification process whenever the deposit is made, and whenever updates are submitted must also be stated in the agreement. This process would ensure the authentication on whether the items deposited are in good working condition.

Finally, a clause stating which party will bear the cost for the services of the escrow agent’s services and any legal or administrative costs should also be indicated.

Anyone can act as the code escrow agent; however, there are software escrow services that have facilities which usually include the provision of a ready made agreement, the use of fireproof storage facilities with state of the art security systems that would only allow persons that will pass biometric scans or other security measures to enter the facilities. These source code escrow companies can be easily found on the Internet.


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