The majority of Software Escrow Agreements are established in order to provide 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.
A common misconception regarding the establishment of a Software Escrow Arrangement is that it is designed specifically for Licensees . . . this is simply not true! Below please find reasons why Technology Vendors should want to establish a Software Escrow Agreement.
Reason #1 – Another Technology Vendor’s product, whose functionality eerily similar to yours, has just entered the market place.
Explanation: If your source code is provided to your Licensee upon purchase, a competent programmer or independent contractor working at your Licensee’s location, could modify the existing program and/or develop a competing program. By placing your source code in escrow, you minimize the chances of having your organization’s intellectual property stolen.
Reason #2 – Your organization’s desire to protect Maintenance Revenue
Explanation: If source code is provided to your customer after licensing, a great deal of maintenance revenue would be lost, due to third parties maintaining their own software. And besides, do you really want your customers messing around with your code?
Reason #3 – Your organization’s desire to protect Upgrade Revenue
Explanation: See #2 above
Reason #4 – Increase the value of your Product!
Explanation: Placing your organization’s source code in escrow demonstrates that you have your customers’ long-term interests in mind. Your organization recognizes that it has maintenance and upgrade obligations to your customers. You also recognize that your customers must have access to the intellectual property, in the event that your organization is unable to satisfy the obligations set forth in the License Agreement.