Software Escrow Agreements

Businesses relying on intellectual property assets sometimes require specialized tools to protect against potentially business ending problems.  The software escrow agreement is one such tool.  Software escrow agreements protect critical intellectual property assets (“IP”) and provide continuity of use by making the IP available to both parties under certain conditions, including bankruptcy.  Essentially, the software escrow agreement permits the customer access to the licensed product and simultaneously safeguards the vendor’s IP and proprietary information.  

Typically such agreements are set up as 3rd party agreements in which an escrow agent stores the vendor’s underlying intellectual property in a location under the control of a third party where it is accessible to the licensee under certain circumstances. For example, software source code deposited to an escrow account under third party control can be updated, serviced or customized by the developer/vendor, but can also be utilized by the licensee, even if the licensee does not have access to the protected source code itself.  Escrowing software source code is the most typical use of such agreements, but MasurLaw has also applied them to other intellectual property including domain names, or proprietary information, like business plans, to which both parties should have access, but to which the providing party wants to maintain control.  This is a developing area of law which is particularly relevant in the Web 2.0 or cloud computing space, in which nearly all information, content and software is kept under the management and control of third parties.  

Why use software escrow agreements?  As a licensee, protecting a crucial part of your business against the risk of suddenly losing access to critical intellectual property deserves an extra measure of assurance.  If the vendor becomes bankrupt, sells its assets or otherwise passes out of existence, the customer will be ensured continual access to the underlying intellectual property assets necessary for its success.  Without a software escrow agreement, your business may be damaged as the essential technology will be cut off.  MasurLaw uses software escrow agreements in situations like the one described above, or in other circumstances when the inability to access, work with, or use mission critical intellectual property or equipment could jeopardize your business.