As a rule, it is a three-party relationship. The parties to the escrow agreement are SWEAG as escrow agent, the supplier as licensor, and the beneficiary as licensee.
By depositing the source code in escrow the beneficiary will be able to perform or have performed the services owed by the supplier, if the latter fails to (or cannot) provide them either adequately or at all.
Depositing the source code in a bank safe does not adequately meet the needs of supplier or beneficiary. If only the supplier has access to the bank safe, the beneficiary cannot access the source code without the supplier’s agreement. If the supplier and beneficiary have joint access to the bank safe, the supplier also has the possibility to avoid the beneficiary’s access to the bank safe if a condition of release has occurred. If only the beneficiary has access to the bank safe, the supplier loses all control over the use of the source code deposited. Another problem of depositing the source code in a bank safe is its lack of bankruptcy protection. Since the bank does not obtain fiduciary ownership of the deposited object, if the supplier becomes bankrupt, the deposited object is part of the bankrupt estate and therefore is not available for the beneficiary. As a rule, lawyers and trustees do not have the business-specific knowledge or suitable premises for the deposit and storage of software. In particular, SWEAG’s know-how offers benefits to the parties in both the drafting of the escrow agreement and the provision of professional services after the agreement takes effect.
As a rule, the deposited object is a data medium (DVD, CD, magnetic tape, etc), on which the software’s source code and the development and system documentation is stored.
The escrow agreement entitles the beneficiary to check the contents of the deposited object jointly with the supplier at regular intervals. SWEAG, on the other hand, checks only the number and outward appearance of the deposited object(s). SWEAG does not check the contents, because it does not have the testing or production environment for a material check. But if the parties so wish, SWEAG can provide support in the procedures for running a code check.
SWEAG obtains fiduciary ownership of the deposited object. Hence, if the supplier becomes bankrupt, the deposited object does not become part of the bankrupt estate.
The deposited object is stored in safes that meet the EN3 European standard safety specifications.
The escrow agreement provides that the supplier must, within a specified period, deposit with SWEAG all new versions of the deposited object after each update. In addition, regardless of updates, the supplier must replace the object at least once annually.
Its main duty is the fiduciary storage of the deposited object and its release in clearly defined circumstances.
The conditions for release are at the core of an escrow agreement. SWEAG has many years of experience and considerable know-how in drawing up the conditions for release. This is greatly for the benefit of both parties. Typical cases for release are, for example, the supplier’s bankruptcy, early stages of liquidation, and/or the closing down of his development or maintenance activities, or the developers death.
As a rule, the beneficiary’s rights of use in case of release are those specified for the basic relations between supplier and beneficiary.
An escrow agreement is a continuing contract that ends with the release of the deposited object to the beneficiary or with the return of the object to the supplier at the end of the agreed contract period. The specified contract period is the time during which the beneficiary and licensee depend on the software.
As a rule, the escrow agreement specifies that the fees are payable by either the supplier or the beneficiary, subject to joint and several liability with the other party.