Technology Escrow Agreements

A Sample Escrow Agreement States:

  • In a Software License Agreement, the Technology Vendor grants the Licensee for its use a license to use certain computer software program(s) and related documentation which are proprietary to the Technology Vendor and access to which must be restricted to protect its business.
  • The Technology Vendor has maintenance and upgrade obligations to the Licensee as provided by the License Agreement.
  • The Licensee must have access to those materials identified in this Agreement if Technology Vendor is unable to satisfy its obligations as set forth in the License Agreement.
  • To address the respective needs of the Technology Vendor and Licensee, the Technology Vendor and the Licensee, have agreed to escrow Deposit Materials with the Escrow Agent.

So what exactly can be deposited into Escrow?  The answer to this question is directly related to what the Technology Vendor and Licensee agree to as their escrow definition of “Deposit Materials”.   In a Technology Escrow Agreement, “Deposit Materials” will be that portion of a Technology Vendor’s Intellectual Property that will not be provided to the Licensee; however, the Licensee wishes to safeguard.

As stated in a prior blog entry, the majority of Technology Escrow Agreements are established in order to resolve the ‘source code dilemma’.  For summary purposes, establishing a Technology 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.  So, in most Technology Escrow Agreements, the escrow definition of“Deposit Materials” is associated with a Technology Vendor’s source code.

As it relates to a Technology Vendor’s source code, the escrow definition of “Deposit Materials” can be defined in a Technology Escrow Agreement as:

“Deposit Materials” means proprietary technology and other materials identified on Form 2.1.  They are readable and useable in their current form or, if any portion is encrypted, the decryption tools and decryption keys must also be deposited and separately identified as such on Form 2.1 attached; and include a current version of any Source Code for all software licensed under the License Agreement and all updates thereto, together with all documentation necessary to enable a reasonably skilled programmer to maintain such licensed software, and descriptions of all compilers, assemblers and other computer programs and related documentation and other materials that are necessary or useful to use, modify and prepare derivative works of such Source Code.

Although the majority of Technology Escrow Agreements involve the deposit of source code(s), other deposits may include:

  • Hardware Designs – Paper, electronic
  • Development Plateaus
  • Encryption keys
  • Providing encrypted source to the Licensee & depositing the encryption key with an Escrow Agent

Although it is important to have both the Technology Vendor and Licensee agree to the contents that make up the escrow definition of “Deposit Materials”, it is equally important that both parties understand/appreciate what WILL NOT be deposited into escrow (e.g., third-party software).

Summary

Although the majority of Technology Escrow Agreements involve the deposit of a Technology Vendor’s source code(s), the fact of the matter is that Technology Escrow Agreements can be established for various types of Intellectual Property that a Technology Vendor does not want to provide to the Licensee; however, the Licensee wishes to safeguard.  The company you choose to open your technology escrow account should provide you with a template Agreement that permits both parties to review/edit free-of-charge, making certain that both parties agree to the contents that will make up the deposit by defining the term “Deposit Materials” accurately.

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National Software Escrow, Inc.

8225 Brecksville Road, Building Three, Suite #105 Brecksville, OH 44141

PHONE: (440) 546-9750 FAX: (440) 546-0207

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