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Here at LE&AS we provide high quality software escrow solutions to businesses looking to protect their business critical applications and source code. As Software services evolve rapidly and move towards Cloud based services, we offer agreements specifically developed to give SaaS users peace of mind around their software escrow agreements.

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Frequently asked questions

Software Escrow

What is ‘software escrow’?

A software escrow is whereby a third party (an escrow agent) protects a software user/licensee (and the vendor/licensor), by holding the source code, or data, in ‘trust’ to be released to the licensee, in the event the vendor, or licensor, of the software ceases to trade or in some cases provide support for product/service for any reason.

Why would I need software escrow?

If the software vendor goes out of business, ceases to support the software or breaks the terms of the contract between the user and licensor, then, clearly, depending on how the licensee uses the software, there could be serious implications for the licensee and their business.

How will a software escrow agreement protect me?

Without a software escrow contract, the implications could be disastrous, especially if the software is a business-critical component of a company’s activities. As well as putting operations on hold, deadlines can be missed, clients lost and the cost of replacement software could be significant.

How does software escrow work?

To take out a software escrow, you’ll need a third party to prepare a software escrow agreement for you. Once this is finalised, a copy of the source code is sent to the escrow company for safekeeping. If a breach of the agreement occurs for any reason, the code can then be released to the software user/licensee. The software escrow can also protect the licensor, particularly in regard to any relationship with hosting companies.

What is the ‘source code’?

The source code is the core programming owned by the vendors or creators of the product. This contains industry secrets that are not normally released to licensees, in case they are copied and sold on. So you can see how the agreement protects both licensor and end-user.

What are the legal implications of a software escrow agreement?

The software escrow agreement is a legally binding agreement between the creator/owner of the software, the licensee/user and the trustee/escrow agent.

What does a software escrow contract cover?

This can vary greatly from one contract to another, depending on the software involved, as well as the needs and concerns of each of the parties covered in the agreement. The escrow agent should be able to advise on the best agreement for your needs.

Are there different types of software escrow?

Yes. Because software has many different applications, contracts have been designed that match the needs of companies using the technology. One example is a SaaS escrow agreement (Access Assure), which offers protection for data and services in the cloud. This is used where there are three parties involved, the licensor, the hosting company and the licensee.

Who pays for software escrow?

In a standard escrow agreement, the licensor will pay a set-up fee for the agreement, while the licensee will be responsible for the annual fee for maintaining the contract. The licensee also accepts responsibility for a small release fee when the contract is terminated. In the event of a SaaS escrow agreement, the licensor is responsible for both the set-up fee and an annual fee. The licensee also pays an annual fee, as well as the release fee in the event of termination of the contract.

Who is responsible for managing a software escrow agreement?

The escrow agent is responsible for creating the contract and maintaining the agreement, as well as dealing with any disputes.

What happens to data in the cloud after a provider has become bankrupt?

Access Assure gives you access to all cloud-based software and data under the SaaS escrow agreement prior to the licensor or hosting company going out of business.

How much does a software escrow agreement cost?

This will depend on the terms of the agreement and whether you are a licensor, licensee or hosting company (see here).

How is code held in escrow?

All code is integrity tested before being transferred to an ultra-secure, storage facility.

How is code released?

Code is released under the terms of the contract, for instance, if the licensor goes out of business, or fails to provide support or service, under the terms of the agreement.

Can the agreement be changed or transferred?

It’s a good idea to make sure all your concerns are satisfied in the initial agreement, as changing or transferring the contract will require the approval of all parties.

For further information on any aspect of software escrow, call on 0870 164 2264.