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When licensing software, the owner/licensor usually provides the licensee only with object code and related supporting materials. Escrow involves the Licensor depositing a copy of the Source Code and related supporting materials with an independent third party (the Escrow Agent) for release to the Licensee under limited circumstances such as if the Licensor goes out of business or if it stops maintaining the software product.
The escrow agreement is entered into by the Licensor, the Licensee and the Escrow Agent and it sets out the rights and obligations of each of the parties and the circumstances in which the Source Code may be released to the Licensee. In particular, an escrow agreement ensures a licensee's access to the code and materials in the event that it is in dispute with the licensor under the licence agreement.
As Licensor, escrow can be an added incentive to Licensees, knowing that access to the software is unlikely to be interrupted or cut off in certain circumstances.
As Licensee, the benefit is the ability to continue to use the licensed software in the event of a major dispute with the Licensor and/or where the Licensor goes out of business, goes bankrupt or is wound up.
It is usual for the Licensor to nominate the escrow agent - this is for practical reasons and particularly where the Licensor may be granting more than one licence of the software. Under the escrow agreement, the Licensor or the Licensee will pay the escrow fee: if there are multiple licensees it may be more practical for the Licensor to pay the fee, however in this situation the Licensee should be notified by the Escrow Agent if the escrow fee has not been paid as this may put the escrow agreement in jeopardy. If the Licensee has requested the escrow arrangement, it may then be more appropriate for the Licensee to pay all relevant fees.
This Software Escrow Agreement includes the following clauses:
2. Licensor Obligations, Representations & Warranties
3. Escrow Agent Obligations, Representations & Warranties
4. Release of Source Code and Materials
5. Objection to Release of Source code
6. Escrow Fee
9. Dispute Resolution
11. General Provisions