Software Escrow Within a Legal Framework
Published on 14/10/2024
Within modern legal practice, software forms the backbone for essential organisational operations. Alongside the increasing reliance on third-party software, is the risk of software vendors facing problematic issues, going out of business, or failing to maintain the delivery of a product and/or service.
It’s in such situations that Software Escrow can come into play to provide a safety net and ensure business continuity, even in the face of disruption and crisis.
A Software Escrow Solution involves a legal tri-party agreement in which a trusted third-party Escrow agent, such as SES Secure, holds the source code and documentation of a critical software application. The agreement pre-determines the release conditions that need to be met for the source code to be released. If the conditions are met (e.g., a vendor going into bankruptcy), the source code is released, enabling the application’s end-user (e.g., a lawyer) to resume their access and utilisation of the application.
The absence of a business continuity plan can contribute to financial loss, damaged stakeholder relationships, reputational damage, and the inability to conduct critical operations (e.g., using client management software to manage clients and cases).
The team at SES Secure are passionate about educating the law community on the extensive benefits of Software Escrow for business continuity and operational resilience. We are proud to have a partnership with The Society for Computers and Law, the leading educational charity for the tech law community. Our resources for legal professionals can also be found on the Lexology website.
The legal framework surrounding Software Escrow encompasses several key components:
A Software Escrow Agreement is a legal tri-party arrangement between a software vendor, an Escrow agent, and an application’s end-user. As mentioned, the agreement clearly outlines the criteria that needs to be met for a source code release event to occur.
These are specific conditions that are pre-determined in an Escrow Agreement. When these conditions are met, an Escrow Agent is authorised to release the materials held under Escrow to the software licensee (i.e., the end-user). Examples of release conditions that would facilitate a release event include vendor bankruptcy, vendor insolvency, and a vendor not providing adequate maintenance and/or support.
We recently supported a client during a crisis event in which release conditions were triggered. Check it out – “SES Secure Client Case Study – Software Escrow Release Event”.
At SES, following a client depositing their source code to us, it is evaluated by our in-house team of technological experts to ensure that it is accurate, up to date, and can be redeployed if required.
Within the legal framework of Software Escrow, SES clearly define the intellectual property rights of all parties involved in the arrangement. This determines source code ownership and the end user’s rights upon release.
Many client projects require the implementation of a Software Escrow Solution. Additionally, many emerging laws involve regulations that can be satisfied through utilising Software Escrow, such as the Digital Operational Resilience Act (DORA) which is set to be enforced in the EU Finance Sector in January 2025.
Within the ever-changing legal landscape, software continues to hold a magnitude of influence. For forward-thinking organisations seeking to cover all angles of risk, Software Escrow is a tool that comprehensively addresses and supports business continuity, risk mitigation, and operational resilience. Alongside these great benefits, Software Escrow also provides peace of mind to both software user and vendors. Furthermore, during a crisis event, Software Escrow can form the foundation of an effective disaster recovery strategy.
Whilst many lawyers educate their clients on the optimised level of risk mitigation that’s provided by Software Escrow, it may not be a tool that they utilise themselves. For lawyers, an Escrow Solution can support:
Interested in understanding how Software Escrow can specifically be implemented within your organisation? Please don’t hesitate to get in touch or give us a call on 0161 488 1400.