The concept of software escrow agreements is now a widely recognised aspect of doing business in today’s digitalized world, but there is often some confusion about the different types of software, or source code escrow agreements available on the market because these contracts can take many forms, with each depending on the needs and preferences of the involved parties.
In its most basic definition, a source code escrow agreement is a contract between a software supplier and their client made so that the client is guaranteed access to the software source code, albeit under several specific conditions, which include bankruptcy or insolvency of the supplier, and issues resulting in a breakdown of the required ongoing software maintenance.
A source code escrow requires the supplier to deposit their source code with a trusted third-party software escrow provider. Because there are so many options available it can be difficult to know which is the best choice for you and your client.
The most basic form of a source code escrow agreement is the access clause. The access clause serves as a way to summarise the conditions in which the client can access the source code. The chosen escrow agreement provider is a ‘trusted entity’ with which a copy of the software source code will be placed for safekeeping. An access clause software escrow agreement can be shared amongst multiple clients.
A bipartite source code escrow agreement is for clients who would like to maintain more control over the management of their software escrow agreement. This is a two-party contract between the software supplier and the client that is independent of the commercial contract. Both the source code supplier and beneficiary take part in the management, enabling the client to monitor the status of the deposit made by the software supplier and to take necessary action if the terms agreed to are not upheld. The bipartite source code escrow agreement does not include the software escrow agent in the contract, it is a relationship solely between the supplier and the beneficiary.
The tripartite source code escrow agreement is the most common, due to the extra level of security it offers. This is a three-party agreement between the software supplier, software beneficiary, and the software escrow agent who is in charge of the contract’s management, ensuring that the terms that the terms are respected. If not, the supplier is held accountable.