Escrow agreements for the acquisition of source codes and licenses for their use

Technology transfer agreements as well as investment agreements are often accompanied by source code escrow agreements used to secure the IP rights to the software.

Source code

The key of programs and software is the source code. It is the fundamental component of a computer program that is created by a programmer.  The source code should be written using a human-readable programming language – usually plain text. The main goal of it is to set exact rules and specifications for the computer that can be translated into the machine’s language.

What is source code escrow?

Sometimes it happens that even if special software tailored to one’s needs is created by a professional company, problems may arise. The investor needs to make every effort to protect company in the event that the contractor’s company ceases to exist, for example because of its bankruptcy or liquidation. In such cases, the solution to secure the transfer of ownership of the source code is to put in place source code escrow agreement. This is a service that helps protect all parties involved in a software licence by having a neutral, independent third party escrow agent hold the source code. 

Main principles of source code escrow