Why EscrowThe Answer is simple... to protect both parties in a License Agreement.
The Beneficiary’s Philosophy
In many of today’s technology license agreements, companies licensing technology, Beneficiaries, are requesting that along with the program(s), a copy of the Technology Vendor’s proprietary source code also be included. Source Codes are generally requested by Beneficiaries simply for their own protection. With access to the source code, they 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.
The Technology Vendor’s Philosophy
Many Technology Vendors’ business plans do not support providing a copy of their source code to their clients. If source code was provided, a great deal of maintenance revenue would be lost, due to third parties maintaining their own software. More importantly, if their source code is provided upon purchase, Technology Vendors fear that a competent programmer or independent contractor at the Beneficiary’s location could modify the existing program and/or develop a competing program.
The Escrow Compromise
Many Technology Vendors are now compromising with their clients by establishing source code escrow accounts. Establishing an escrow account resolves the source code dilemma. It provides the Beneficiary with access to the source code and documentation in the event that an unanticipated and/or catastrophic occurrence does not permit the Technology Vendor to continue its operations. For the Technology Vendor, establishing an escrow account protects their interests and increases the value of their product to their prospective clients.