Establishing an Escrow Agreement provides the Licensee with access to the Technology Vendor’s source code and documentation, in the event that a specific, release/triggering event agreed upon by the Technology Vendor and Licensee occurs
Below please find Reasons why Licensees should want to establish a Technology Escrow Agreement.
Reason #1 – The cost associated with implementing another Vendor’s solution
Explanation: Investing in a Software Escrow Agreement may not be a priority if your organization can easily swap out the “now defunct” Vendor’s IP with another Vendor’s solution. It’s another story when the “now defunct” Vendor’s solution is responsible for a mission-critical application installed and implemented in your environment. The cost of establishing/maintaining an Escrow Agreement is minimal compared to that of investing in another Vendor’s solution.
Reason #2 – The Vendor is unable to satisfy its maintenance and upgrade obligations
Explanation: An Escrow Agreement may stipulate that the source code will be released if the Technology Vendor is unable to discharge any of its maintenance obligations to the licensed Program in accordance with the warranties or other standards set forth in either the License Agreement or, if applicable, a written software maintenance agreement.
Reason #3 – The Vendor is unable to correct an Operational Defect
Explanation: An Escrow Agreement may stipulate that the source code will be released in the event that the Technology Vendor is unable to correct any Operational Defect in the Program, which prevents it from functioning in accordance with the applicable specifications, documentation, performance criteria and other warranties and descriptions defined in the License Agreement.
Reason #4 – The Phone Number for your Vendor is no longer ‘active’ and/or their website does not exist anymore.
Explanation: Typically, a Vendor will not advertise that they are closing their doors. An Escrow Agreement may stipulate that the Technology Vendor’s source code will be released in the event that the Licensee has reasonable cause to believe that an event has occurred which will cause the Technology Vendor to fail to meets is warranty and maintenance obligations.
Events such as:
- General assignment for benefit of creditors
- Receiver appointment
- Assets become subject to insolvency proceeding
- Wind-up or business liquidation
Additional events may include:
- Bankruptcy Proceeding
- Assets become subject to bankruptcy proceeding