When selling anything of great value to someone unknown to you, it is recommended that you use an escrow agent, and this applies to software and intellectual property just as much as items like jewelery. An escrow agent is a trusted third party agent, who works on an escrow agreement that is satisfactory to both parties involved, the buyer and the seller, and handles receipt of the item or items being sold, as well the funds to purchase them. When all points of the escrow agreement have been met, the agent will then release the goods to the purchaser, and the money to the seller. This protects against fraud and scams, and is becoming more necessary for software now.
Now escrow can be applied to intellectual property, and such things as software, where the source code is held by the escrow agent. A software developer write some source code and then sells the resulting software to a licensee, but this licensee needs to know that the software will still be supported by the developer for at least a few years, otherwise it is useless to him. The developer may then set up an escrow agreement stating that they will maintain the software for a certain length of time, and there may be other conditions instead of this, or as well as this, depending on the developer's needs. A third party who is trusted by both parties, called an escrow agent, arranges the agreement and to hold the source code for the software in case of a default by the developer. Some of the purchase price may be placed in an escrow account by the agent, so that both parties stand to gain by completing the escrow agreement as it is written.
Should the contract be broken, or not completed at some stage, then this allows the third party to release the source code to the licensee if the developer has not done as stated in the escrow agreement, or the funds be released to the developer if the licensee is at fault. For inexpensive software, using escrow services may not make any sense, but for business software that a company depends on, it makes sense to use software escrow as a form of protection, so that should the developer not produce the necessary updates, the source code can be released by the escrow agent.
Of course, there are many escrow service agents available, and due diligence needs to be done before choosing one over another. The items to check for are the length of time the company has acted as escrow agents, the number of agreements that end up with the source code being released, whether there are negative reports and comments about the company, what are the fees, whether the changes to the escrow agreement result in more costs, whether the services offered cover you particular situation, and much more. It is necessary to interview the escrow service companies you are most interested in. You need to feel comfortable with your choice of software escrow services, as this is very important for the future of your business.
Find out what escrow agreement your business will need. There are different user plans available, the most used being the single user plans, the multi user plans and investor security plans. Obviously the single user plan is for software that will only be used by one business. This tends to be highly customized software, and obviously is very expensive as a result of this. Then there are MUPs or multi user plans where the software is sold to many different users or licensees. Investor security plans or ISPs are in existence to protect software investors from fraud or scams, as huge sums of money are often involved with software development. In this case, the escrow agent will generally reserve some of the funds in an escrow account, which encourages the developer to complete what is written in the agreement, and ensures the buyer pays in full.
Dealing with software escrow services is not as complicated as it may sound, and it is well worth pursuing if you are going to be buying software that is expensive, and you need reassurance that updates and maintenance will still be available in a few years. When this happens,the source code will be released by the escrow agent, provided the agreement has been written for protection in this case. Then, having the source code for the software will enable you to find someone else who can make the necessary updates for you. While this may not sound like a suitable solution, the other option is not to have the source code at all. This lack of code can be totally devastating for a company whose business uses the software in their day to day activities. If there is a failure in the software, there can be long delays in getting it fixed, and this could involve a great deal of cash, wasted time and frustration.
So, when considering the purchase of expensive software, whether it is customized or not, look into the option of having a software escrow agreement formalized so that your business has some protection for its future.
With his continued quest for more knowledge to share, Steve Jackson now shares his knowledge about software escrow, and if you are a software developer, or a licensee, it is worth checking out his siteat
=> software escrow agrrements
which gives you plenty of information about third party escrow services, as well as escrow agreements, and technology escrow.
Orignal From: Software Escrow and the Protection It Provides
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