What are the Different Types of Software Escrow Agreements?
With the growing dependency on software across nearly all sectors, software escrow agreements are increasingly becoming a service that businesses are asking for when it comes to choosing their software supplier. At Vaultinum, we see it every day- software suppliers coming to us to discuss their software escrow agreement options, due to a client insisiting that they would like one in place before continuing to work with them.
After all, their valid concerns around the risks associated with commercial software applications, SaaS applications and software source codes are easily mitigated with the offering of a software escrow agreement from their supplier- so it's a simple solution.
Although the concept of software escrow agreements is widely recognised, often there can be confusion around the different types of software escrow agreements out there on the market, as a software escrow contract can take many forms, with each one depending on the needs of the parties. At its most basic definition, a software escrow agreement is a contract between a software supplier and their client. It is made so that the client is guaranteed access to the software source code under some specific conditions, including bankruptcy or insolvency of the supplier and software maintenance issues.
Within a software escrow, the supplier is required to deposit their source code with a trusted third party software escrow provider. But with so many options out there, it can be hard to know which choice is the best for you and your client.
Here at Vaultinum, we like to keep things simple. That’s why we’ve written a short overview on each of the different types of software escrow agreements that we offer, what level of control they give you and who exactly is included in the software escrow contract itself.
Type 1: Basic Software Escrow Agreement – Access Clause
Let’s start by looking at the most basic form of a software escrow agreement: the access clause. The access clause option is a clause which is integrated into an existing contract between the beneficiary and supplier such as an end-user licensing agreement, maintenance contract or a clause in the general conditions of use. It serves as a way to summarise the conditions in which the client can access the source code.
The chosen software escrow agreement provider is mentioned in the access clause as ‘the trusted entity’ with which a copy of the software source code will be placed for safe keeping. An access clause software escrow agreement can be used amongst multiple different clients as it is not specific to a particular client.
The limitation to using an access clause as your software escrow agreement is that the software escrow supplier is not a party to the contract alongside the beneficiary. This can potentially create complications when the beneficiary wishes to access their source code, mainly because, from a legal standpoint, the software escrow supplier cannot be bound by said contract. It also means that the responsibility of managing the escrowed elements lies in the hands of the software supplier, with the client having no control over the software escrow management nor the updates of the escrowed source code.
Type 2: Bipartite Software Escrow Agreement
For clients who are looking for more control over the management of their software escrow agreement, we offer the option of a bipartite software escrow agreement.
Contrary to the access clause option, this is a two-party contact between the software supplier and the client and is independent from the commercial contract. In this type of software escrow agreement, both the software supplier and software beneficiary play a part in the management, which in effect enables the client to monitor the status of the deposit made by the software supplier and take action if the agreed terms are not respected.
The bipartite software escrow agreement does not include the software escrow agent as a party in the contract, as this is simply a relation between the supplier and the beneficiary.
Type 3: Tripartite Software Escrow Agreement
The tripartite software escrow agreement tends to be the most common type of software escrow agreement- often due to the extra level of security and peace of mind that it offers.
The tripartite source code escrow agreement takes all the principles of the bipartite software escrow agreement one step further by becoming a three-party agreement. This means that the software escrow contract involves the software supplier, software beneficiary and the software escrow agent. It is the software escrow agent who is in charge of the management of the contract and who ensures that the terms that have been outlined in the contract, are respected. If for whatever reason this is not the case, it is the job of the software escrow agent to hold the software supplier accountable- something that in our experience, software clients appreciate greatly.
Here at Vaultinum, we offer software escrow agreements that are best tailored to you and your needs, to meet all business requirements. Whether your software is hosted on-premise or on the cloud, our software escrow agreements ensure the highest level of security, simplicity and service throughout the entire software escrow processs.