As a software developer or vendor, protecting your software or critical code against copyright infringement, patent issues or other potential risks is an essential part of intellectual property management. For clients or end users, ensuring continuity of operations and availability of support can be critical to business survival. Investors making substantial capital investments in custom software development projects will want to protect their investment and reduce any risk of loss. Software escrow services can provide such protection for developers, clients and investors alike.
Whether its custom source code or SaaS data that is to be protected, software escrow services offer a tool to insure and protect possibly your most valuable asset. There are many cases where the benefits of such software escrow services can help mitigate or eliminate potentially disastrous risks to the integrity of your software asset, data operations or investment in software development.
How do software escrow services work?
An independent third party, the escrow agent, keeps a copy of the critical software asset stored in a secure location. Under the software escrow agreement when a designated event occurs the original software or data or other deposited materials such as documentation, encryption keys, passwords or other items deemed as the intellectual property of the owner are released to the owner or party designated in the software escrow agreement.
Benefits for software developers
Software escrow services allow developers to construct a date stamped chronological history of development of software or code, testing, documentation and other critical materials therefore proving ownership of such intellectual property. This can provide protection against theft or unauthorised copying by competitors or even rogue employees.
A company who uses and deposits their software asset material in escrow can find it much easier to deal with legal disputes and issues later as they will be able to produce evidence of the development of such assets with chronological proof of their authenticity and ownership. This can be invaluable in the case of copyright issues as lodging the code, or parts of it, with the copyright office would make the code essentially public and open to copying. In the case of the code containing trade secrets this would mean that they cease to be such, due to their public availability through the copyright office.
Benefits for clients or end users
Many client companies who invest substantially in custom software need to ensure the continuity of operations, maintenance and support being available. In the case of subscribing to SaaS applications, the provision of constant access to the data stored on a daily basis for the purpose of business analytics can be critical. Clients will also want a guarantee that the stored data will be available in the event of unforeseen events such as bankruptcy, service outage or corruption of data, to ensure business continuity.
Benefits for investors
As well as offering protection for developers and insurance for clients and end users, the deposit of such key intellectual property materials and data into software escrow can also make the task of attracting investors and financing much easier for developers.
Any potential investor will want to ensure that the developer or company they are about to invest in does actually have ownership rights over the software intellectual property in which they are effectively investing, as the value of such an investment will be directly related to the software or code to be developed. While legal contracts may mitigate some of the risks, there are always unforeseen events such as founders or key developers leaving the company and taking code or company secrets with them, company bankruptcy or legal disputes about when the intellectual property was actually created.
Software escrow services can help protect such capital investments by documenting exactly what was financed and when as the intellectual ownership rights, copies of code, and other related critical assets are date stamped and deposited with the escrow agent. In a worst case scenario, this can lead to the recovery of real tangible assets which still have value and can be taken charge of by the financing parties and allow development to be continued.