The 5 different types of Software Escrow agreements

The 5 different types of Software Escrow agreements

An Escrow contract can take many forms depending on the needs of the parties. Although the traditional Escrow agreement is a tripartite contract between a digital asset owner, a beneficiary and trusted third party, it is not the only possible configuration. First, it is possible to escrow a digital asset, such as source code, simply via a special clause introduced in a contract (Software Escrow clause), but it is also possible to have a quadripartite agreement involving a distributor on top of the traditional software escrow tripartite contract. An Escrow can also help a beneficiary manage his dependencies to his supplier (Beneficiary Escrow contract) or can be concluded between a SaaS and a beneficiary (SaaS Escrow).

Basic software escrow contract

 

An agreement containing an escrow clause is signed between the Beneficiary and the Digital Asset Owner. This escrow clause can be a standalone contract or part of a broader agreement entered into between the Beneficiary and the Digital Asset Owner. Vaultinum is happy to assist Digital Asset Owners in drafting an escrow access clause (contact@vaultinum.com).

The Software escrow provider is not a party to the agreement containing the software escrow clause. However, the Software escrow provider is mentioned in the clause as the trusted entity with which a copy of the Digital Asset Owner will be placed for safe-keeping. The escrow clause also mentions under which circumstances the escrowed Digital Asset may be released, to whom and under which conditions. In the escrow clause, the Digital Asset Owner undertakes to deposit the Digital Asset with the Escrow Agent. This involves a contract between the Digital Asset Owner and the Escrow Agent.

The downside to the Basic Escrow Contract is that the software escrow supplier is not a party to the contract with the Beneficiary. This can create complications when the Beneficiary wishes to access the Digital Asset, mainly because, from a legal standpoint, the software escrow supplier, who is not a party to the contract between the Digital Asset Owner and the Beneficiary, cannot be bound by said contract.

Tripartite Software Escrow Contract

 

This is the most common form of Escrow. It is a specific agreement entered into between the Digital Asset Owner, the Beneficiary and the the software escrow supplier. This sets out the obligations and rights of all three parties, such as the deposit modalities (nature and content of deposited elements, frequency of updates, verification of the deposited elements, etc.), the Escrowed Digital Asset’s access triggering events (bankruptcy, insolvency), the Digital Asset’s access procedure, the rights granted to the Beneficiary once access has been granted, the duration and termination conditions of the Tripartite software escrow Contract, and the apportionment of the escrow costs between the parties.

 A model tripartite software escrow contract can be made available by Vaultinum upon request.

Complex multi-party software Escrow Contract

The Tripartite Escrow Contract can sometimes be expanded to include another party, such as a distributor. Indeed, where the Digital Assets Owner uses a distributor for the distribution of its Digital Asset to the Beneficiary, it may make sense to release the source code to the distributor for the purpose of continuing to provide the software, and related maintenance and support to the Beneficiary.

 

The Beneficiary software escrow Contract

 

Escrow can also be seen as a way for a Beneficiary to manage their dependencies on multiple suppliers in a world where software solutions increasingly involve the integration of multiple products from multiple software suppliers. The same software escrow agreement is entered into between the Beneficiary and each Supplier ensuring that the Software Escrow service provider and release conditions are the same, thus ensuring a centralised management of suppliers. Vaultinum is currently upgrading its Online Management Platform to allow Beneficiaries to manage multiple software suppliers. This will also send alerts of when deposits and related updates are required or made.

SaaS Escrow

The establishment of a SaaS Escrow can prove to be a real business continuity guarantee.

SaaS Escrows can take different forms depending on the level of intervention by the Software Escrow provider. In some instances, the Software escrow agreement will involve only the ability to retrieve client data from back-up servers by enabling the Software Escrow provider to access such servers or perform streamlined back-ups, whereby the Software Escrow provider becomes a third-party back-up provider of sorts. The SaaS escrow agreement will include the SaaS provider or cloud provider as applicable. In other instances, the SaaS escrow agreement involves the cloud provider or even the data centers with the Software Escrow provider ensuring continuity of service instead of the software supplier, provided that the cloud provider or data center fees are paid.

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