A typical license agreement may have a “source code escrow clause” within it stipulating that the Technology Vendor and Licensee will establish an escrow agreement within thirty (30) days of the effective date of the license agreement.

In a simple scenario, this is accomplished. The parties do in fact establish their escrow agreement within thirty (30) days and the agreed-upon intellectual property is submitted into escrow.

Now what?

In some instances, this is where the story ends. That is, the Technology Vendor and Licensee establish/reinforce their relationship over the years installing/implementing various releases, improvements, revisions, and enhancements generally made available by the Technology Vendor.

The problem lies in the fact that although various releases, improvements, revisions and enhancements are installed and implemented in the Licensee’s production environment, the escrow deposit remains “stale and undernourished”.

A Technology Escrow Arrangement should be considered a “living, breathing instrument” that is fed frequently. Remember that the purpose of having a “source code escrow clause” is so that the Licensee can maintain and enhance the software in the event that an unanticipated and/or catastrophic occurrence does not permit the Technology Vendor to continue its operations.

In order to maintain an effective escrow arrangement, escrow deposits should be refreshed frequently so that the materials in escrow correspond with the Programs actually distributed to the Licensee.