What is Software Escrow?
Software escrow is a three party agreement between a software developer (the depositor), the end user (beneficiary) and the Escrow Agent. The objective of a software escrow agreement is to provide comfort to the end user that if the software developer is unable or unwilling to support the software, the code can be released to them.
The agreement outlines the responsibilities of all the parties and includes the pre-defined release conditions.
What are these release conditions?
The release conditions usually include (these may be ammended):
- Discontinuing support or service of the software application;
- Failure to support the product that is licensed to the Beneficiary and then failing to cure such a material breach within 10 days of notice;
- Transfer of IP rights to a third party who does not provide the same level of protection provided for in the escrow agreement.
If a release condition occurs, the beneficiary can apply to the escrow agent to release the software code. The depositor has the opportunity to dispute such a release condition and if necessary, the dispute may be moved to arbitration.