Frequently Asked Questions
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Software escrow is an agreement whereby a software
vendor/supplier and its end-user agree that the vendor
will deposit the source code and related materials of
a licensed software product on behalf of an end-user
or end-users.
This in order to warrant end-user access to that information
in case the supplier, for one reason or another, is
no longer able or willing to provide maintenance for
the software product. This access is for the purposes
of end-user business continuity only and is not intended
to interfere in any way with the suppliers rights of
intellectual property ownership etc.
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For the Technology Supplier, it is vital to your clients to know that you have taken extensive measures to safeguard their interests. Our escrow arrangements enable you to meet their needs in a positive and structured way and, by excluding unnecessary discussion, you can shorten the sales cycle for your product substantially.
Having a professional escrow arrangements in place for your clients gives you a tangible advantage over competitors of any size. Our Active Escrow arrangements eliminate Business Continuity risk for your clients and encourages the client to use your licensed products in preference to those of even the largest software vendors and developers.
You can use an individual Escrow agreement to offer a client additional security. Alternatively, you can choose to offer the Escrow arrangement as part of your SLA. Or, with an Escrow Europe frame agreement, all your clients can automatically benefit from a single "umbrella" Escrow arrangement.
Escrow Europe operates as Trusted Third Party for both
established and start-up ICT firms. Day in and day out
we handle confidential software source code, documentation
and data. Naturally, we treat these with the greatest
possible care. After all, the good reputation of our
independent position of trust is at stake.
Our standard agreements are drawn up in such a way that
your interests are stringently protected under all circumstances.
For example, we never release materials to beneficiaries
without a formalised, prior discussion with the supplier.
As a Technology End-user, you are obliged to rely on your supplier to provide ongoing support and maintenance for your applications. This dependence represents a significant risk, particularly where business-critical applications are concerned. As a Trusted Third Party, we can help you to eliminate these risks. This is particularly pertinent now that the new principles of corporate governance place increased accountability on the CEO and CIO for designing, implementing and monitoring risk management procedures. With IT and related functions integral to mission critical business processes, professional escrow arrangements that are balanced and offer guaranteed levels of effectiveness have become a necessity. In the turbulent business climate of the new millennium, alI ICT companies have become more vulnerable to unforeseen business events. Even established ICT firms can suddenly run into problems resulting from unforeseen causes such as mergers and/or other causes that can prevent them from being able to fulfil their obligations to you. Our professional escrow arrangements warrant two vital elements for the end-user :
- a quality deposit that is technically verified (at the time of deposit and ongoing over the life of your use of the product), and,
- your legal right of access and use
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Acquisition of a software product usually means purchasing a license for the software ie the right to the use the software only, not ownership. Also, an end-user, who acquires such a license, receives only a "compiled" version of the software, the machine code for the computer to operate with.
However, to maintain, correct, modify and/or extend the software, the original programming sources and documentation are needed. As these sources and documentation remain with supplier, the end-user will usually have a maintenance agreement with the supplier under which supplier is obliged to adjust and extend the software in order to accommodate the continuously changing business needs of the end-user.
What would be the position of an end-user if he is faced with problems in the software and the supplier cannot or will not meet its maintenance obligations any longer? To give access to the relevant material (source code and technical documentation) on such occasions, the end-user and the supplier agree upon an escrow deposit of those materials, verified and administered by a professional Escrow Agent.
Under the arrangement, Escrow Agent is entitled to release the materials to the end-user in the circumstances specified in the agreement.
Upon release of the materials, end-user is able either
to continue the maintenance of the software himself, or
to outsource the maintenance to a third party.
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- Continuity of use of the software by end-user in circumstances
where that would be impossible without escrow.
- Safeguard the underlying business process.
- Protection of end-users investment in the software
(and related hardware).
- Limitation of end-users total dependency of supplier
for maintenance of the software.
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5. When should software escrow be considered?
- When
the software is critical
to the business process of user.
- When user cannot easily replace the software by an equivalent
software product.
- When conversion to other software will endanger continuity
of business operations.
- When user cannot replace the software without substantial
additional cost
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6. What are the benefits to the Supplier from escrow?
- Winning the Business: Increasing demand of licensees for an escrow arrangement can be complied with in a positive and structured way, avoiding unnecessary discussion and shortening sales negotiations.
- Patent, Trade Secret and Copyright Preservation: The deposit may be of great value as legal proof of copyright at any given moment. Our Active Escrow arrangements provide you with documentation when securing a patent claim, significant assistance in an infringement suit and robust proof to support an intellectual property copyright claim.
- Disaster Recovery: Permanent loss of critical information is not an option. Having your most valued asset in escrow with a neutral third party provides you with an alternative to disaster in the event of an emergency. As the escrow agent, Escrow Europe will maintain a copy of your intellectual property stored off-site in a professional vaulting facility and available for restoration.
- Collateral Provision:Putting up your technology as collateral may secure your company much needed funds and, in fact, many lending institutions, such as venture capitalists, angel investors, and banks are requiring technology escrow for asset backed loans where the borrower is using its technology as collateral.
- Acquisition Assurance:Escrow provides concrete evidence of ownership should the developer be acquired.
- Key person protection:Escrow is an extra safeguard for the supplier themselves;- should key employees unexpectedly drop out, the supplier has a complete, documented back-up of the accrued knowledge in the Escrow Europe vaults.
- Single Deposit Advantage:Escrow Europe makes it easy if you have multiple licensees and only want one copy of your source code on deposit. You make a single deposit and Escrow Europe will manage the deposit on behalf of all your licensees.
- Electronic Deposit Delivery:We have several
options to make it easy and secure for Suppliers to
send their deposits to Escrow Europe electronically.
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7. Is Escrow limited to software?
Escrow is not limited to software. Many companies manufacture, assemble blend or make their own products using third party components, recipes or knowledge that is proprietary to that third party supplier and not obtainable anywhere else.
In these instances, professional escrow offers such
companies a vital safeguard to the continuity and ongoing
support of their products and product life cycles. To
this end, Escrow Europe manages such deposits as formulae,
manufacturing processes, master copies and so on.
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8. Why should I choose Escrow Europe?
Escrow Europe is an independent organisation, founded in 1989, which solely concentrates on escrow and the services that are essential for a professional escrow arrangement.
Software escrow in essence has to warrant two vital elements: a quality deposit and the legal right to use it.
- Quality deposit :A quality deposit implies a deposit that at least has been checked for presence and restorability of the materials as agreed between parties: the technical department of Escrow Europe verifies each and every initial and update deposit on these aspects.
Furthermore, a quality deposit implies a deposit that
keeps track of the ever occurring changes made to the
product during its lifecycle: the technical department
of Escrow Europe at least once a year initiates active
follow-up for the latest version of the product.
- Legal right to use: Having the deposit released,
does not guarantee the right of use of the deposit.
Certainly when in the course of events the property
rights of the product change hands, it may happen that
the new owner simply forbids the use of the Material
and legally is justified to do so: a quality contract
to prevent such pitfalls requires specialised legal
skills and the legal department of Escrow Europe has
more than fifteen years of experience in safeguarding
against just those pitfalls.