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Software and Data Escrow


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We provide hundreds of millions of pounds worth of protection to businesses in the UK, EU, USA, Canada, Asia, Middle East and beyond.

We have teams of lawyers in the UK, Spain and Italy and a network of lawyers overseas to assist in all aspects of this and other specialist IT work.

If your organization uses some form of bespoke software for its business then the likelihood is that you will need escrow advice and assistance.

We offer a free no obligation initial advice line, please feel free to contact us on +44 23 8023 5979 at any time.

The importance of an Escrow Agreement

Before we discuss what an Escrow agreement 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 agreement 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 Agreement 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 agreement 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 Agreement.

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 an agreement 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 the source 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 Agreement.

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 agreement. A Licensee should evaluate how critical the software, programme etc is to his business to put into context the importance of this agreement.

Lawdit'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 Lawdit will assist in the event that there is some copyright or ownership dispute.

Izaz Ali is a commerical lawyer who specialises in information technology law and intellectual property law with an emphasis on IT, escrow and buying and selling online businesses.

About the Author

Lawdit Solicitors offer services and advice for litigation, commercial contracts, Intellectual Property and IT legal agreements. We are experts in commercial law with a heavy emphasis on Intellectual Property, Internet and e-commerce law. Lawdit is a member of the International Trademark Association, the Solicitors' Association of Higher Court Advocates and we are the appointed Solicitors to the largest webdesign association in the world, the United Kingdom Website Designers Association.

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Article Published/Sorted/Amended on Scopulus 2007-10-09 11:43:25 in Legal Articles

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