Summary:
Software Escrow Agreements are legal contracts that safeguard mission-critical software and source code, ensuring ongoing access during adverse events. This guide covers their importance, how they work, and the different types.
Main Points:
- Protects data and intellectual property
- Involves a third-party escrow agent
- Regular updates and compliance checks
- Trigger conditions for code/data release
- Types: Single Beneficiary, Multiple Beneficiary with Separated Products, Multiple Beneficiary with Separated Escrows
- Customization for unique needs
When negotiating a software license, it’s common to hear about Software Escrow Agreements. These legal contracts protect mission-critical software and source code. Ultimately, it’s a safeguard ensuring ongoing access in the case of an adverse event.
Software Escrow Agreements are sound legal tools that can help vendors and licensees protect their data and intellectual property. In nearly all cases, a software vendor agreement protects all stakeholders, providing freedom from anxiety and worry.
In this guide, we’ll explain everything you need to know about software escrow agreements. Plus, we’ll discuss the three different types that might apply to your business.
What Is a Software Escrow Agreement?
Software Escrow Agreement Meaning
The goal of a software escrow agreement is risk mitigation. These legal agreements aim to protect all parties involved in a software license. This includes the software vendor (or licensor) and the software licensee.
Both parties enter into an agreement with a third-party software escrow agent, such as Escrowtech. The role of the agent is to hold and secure source code, data, or other intellectual property (IP) assets.
Specialized escrow agents are familiar with specific legal frameworks surrounding software, source code, and technology. For example, they understand and can help explain the Bankruptcy Act. They can also talk you through contractual obligations that may impact your software’s release conditions.
How Software Escrow Agreements Work
Upon entering into a software or source code escrow agreement, pertinent IP will be deposited into an escrow account. This is a secure account, often with multiple off-site storage sites. Licensors can deposit materials in a number of ways, including using a secure online system. It’s also possible to store physical materials in an escrow account if necessary.
From there, the licensor will update the materials on a pre-determined schedule. The escrow agent will ensure they are accurate and up to date. Furthermore, the agent will maintain a record of these updates to ensure compliance.
Each software escrow agreement has a trigger condition. Under certain mutually agreed-upon conditions, the escrow agent can release pertinent code or data to the licensee. For example, if the licensor is no longer able to provide support or goes out of business.
Meanwhile, the licensor has peace of mind, protecting its intellectual property from unauthorized use.
3 Types of Software Escrow Agreements
Not all software escrow contracts are between two parties and an escrow agent. Sometimes licensors have multiple products, each of which requires its own agreement. Likewise, it’s not uncommon for one escrow agreement to involve multiple beneficiaries.
We’ll discuss the three most common types of software escrow agreements below.
Single Beneficiary Software Escrow Agreements (SB)
A single beneficiary agreement is ideal for situations in which there is only one vendor and only one licensee. It is the most basic type of software escrow contract, as described above.
Download an SB Software Escrow Agreement Sample
Multiple Beneficiary Software Escrow Agreements with Separated Products (MB-SP)
An MB-SP agreement is for situations in which there is one software vendor and one or more beneficiaries. The most notable difference is that, in an MB-SP agreement, the escrow materials contain different software projects. The setup ensures beneficiaries only gain access to the software products pertinent to their individual contract.
With this sort of software escrow agreement, new beneficiaries can be added at any time. Each beneficiary can have unique release conditions. If trigger conditions are met, they are granted access to only the deposit materials they are entitled to.
Generate an MB-SP Software Escrow Agreement Sample
Multiple Beneficiary Software Escrow Agreements with Separated Escrows (MB-SE)
Likewise, an MB-SE agreement is an agreement between one software vendor and one or more licensees. What sets this type of agreement apart is that deposit materials for each beneficiary are customized and stored separately.
As with the SM-SP agreement, new beneficiaries can be added to your existing software escrow agreement. However, their deposit materials and release conditions can be unique. If release conditions are met, beneficiaries will only gain access to deposit materials indicated in their agreement.
Generate an MB-SE Software Escrow Agreement Sample
Custom Software or Source Code Escrow Agreements
No two projects or industries are alike, which means each has unique and challenging considerations.
For over 24 years, EscrowTech has customized our agreements to meet those challenges. We will work with you and your attorney to customize an agreement that fits your situation. We have a strong understanding of the technological and legal aspects of intellectual property. This expertise allows us to craft bespoke agreements that are not only secure but also legally sound.
Furthermore, some stakeholders may require specialized services. For example, the most accommodating escrow agencies offer code verification and build documentation. They possess the technical expertise necessary to ensure deposited code is complete, operational, and free from vulnerabilities. EscrowTech offers these services in-house and goes above and beyond to ensure our client’s complex needs are met.
We’re proud of our longevity in the industry, prestigious clientele, and stable pricing structure. We’re eager to help you and your organization achieve peace of mind. Learn more about the software escrow services we offer and begin the process today.