Technology Escrow Agreements

Continued operation and maintenance of custom software is critical to many organizations. Today, business models often depend on uninterrupted access to and operation of key software, and ensuring that this access continues even if the licensor becomes unable to do so, as in the case of bankruptcy, is critical.

Obtaining a copy of the up-to-date source code can help ameliorate these problems, but the licensor may be unwilling to agree to this because source code generally represents one or more closely guarded trade secrets. Furthermore, in some kinds of business transactions, such as mergers and acquisitions, the acquirer of the technology wants to secure it during a period of good-faith negotiations, whereas the seller does not want to divulge it until closing.

Technology Escrow Agreements are more complex than ever in modern cloud-hosted service environments.

A well-crafted Technology Escrow Agreement can be a solution to this problem. In a Technology Escrow Agreement, two or more parties agree to deposit source code (or other types of intellectual property) in an escrow "account" held by escrow agent. Such accounts are similar to the escrow accounts that hold money as security during the settlement period of a pending transaction such as the sale of a property. In this context, a Technology Escrow Account holds the source code to a technology or software product. This ensures that the licensee has access to the source code if the maintenance of the software cannot otherwise be assured. The escrow agent releases the intellectual property only when certain contractually agreed-upon conditions are met.

We can help you identify the key business factors impacting your need for technology escrow, both as a licensor and licensee. We can then help you negotiate technology escrow agreements that target your unique organization's needs, even in today's complex, cloud-hosted service models.