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escrow by solicitors

Written by Izaz Ali on 16 April 2015

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As solicitors we can draft:

Software Escrow Contracts
Website Escrow Contracts
Database Escrow Contracts
Development Escrow Contracts

As a firm our reputation for the above is renowned in the industry and we now act for leading software providers and many household brand owners around the world.

As Lawyers not only do we draft the contracts but we also arranges to act as an ‘escrow agent', we can store the material in escrow and in relation to contracts drafted by others, we can advise on and negotiate the terms of them.

The importance of Escrow Contracts

Before we discuss what an Escrow contract is it is important that we understand what the term 'Escrow' means. 'Escrow' is a legal term which means 'money, goods or a written document, held by a trusted third party, pending the fulfilment of some condition'.

Whilst we all have a software licence contract for the software we use we need some form of software insurance in case things go wrong or certain events take place.

In a typical Software Escrow Contract the owner ('the Licensor') of the software provides a copy of the database content, website, instructions/ support manuals, other Intellectual Property ('IP'), source code (instructions/ statements written in eye-readable form in programmer's language and capable of being compiled into object code and an object code being a computer code that a computer can understand) to an escrow agent (a trusted third party, 'Third Party'). The source code is the formula of any software programme.

The contract sets outs certain events under which the above can be released to a licensed user of the software ('the Licensee'). For example if the Licensor goes into bankruptcy or liquidation, a merger or acquisition takes place, or fails to properly maintain the software or perform under the Licence Contract.

In today's day and age and due to the technological advancements in the IT industry more and more businesses are reliant upon third parties to supply bespoke software for their needs and to provide a maintenance service for the same. Such a contract is therefore essential in order to protect the Licensee from such a risk. This can obviously assist the Licensor in marketing his product better.

Why should a typical Licensor consider placing source code in Escrow?

Placing source code in Escrow will help market the software and a Licensors' services better. The Licensee will gain confidence in the business and will feel safe in the knowledge that if one of the events discussed above occurs then he will be safe. The Licensee will be able to take the source code to any other software designer/ programmers and with this code they will be able to add and amend, fix, any issues and essentially have the Licensee up and running in little time, therefore ensuring continuity of business.

Having said that software developers take pride in their ingenious work and invest a great deal in order to design something bespoke for a client and to gain the competitive edge of others in their field/ industry. It is therefore understandable that they will be reluctant to release the source code to a Licensee.

A compromise to this is the Software Escrow Contract.

If you are involved in the development/ licensing or simply use of software or other bespoke technology then you would need the protection afforded by the use of such an contract. A Licensee should evaluate how critical the software, programme etc is to his business to put into context the importance of this contract.

Lawdit Solicitor's typical clients that would want to utilise this service would include web designers and creatives, database administrators, software programmers etc. These clients are typically coming up with new ideas and they will want a way in which they can safely deposit and archive their work. Depositing their work with us will assist in the event that there is some copyright or ownership dispute.

For further information please contact Izaz Ali by e-mail or telephone +44(0)7973 626288.

If you'd like to know more about this article please send an email to Michael Coyle quoting the article title and any questions you might have, alternatively call the office number on 02380 235 979 or send an enquiry through our contact form.

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