A software escrow contract is an agreement between a software developer and an independent secure data repository that serves as a storage place for the source code of a program or a product. The source code of the program can be released to a third party under certain circumstances, such as when the licensed developer has gone out of business, or when the licensed developer has violated the terms of their contract with the user.
This is commonplace in technology leases and purchases where the software developer could be deemed to be “holding hostage” the source code of the program by refusing to release it. Because of this concern, software escrow contracts are frequently used in technology lease and purchase agreements to convince users that they will not be left helpless amidst broken promises and faulty products.
Many modern collectible cars are now marketed and sold with high-tech elements integrated into the car itself, including in-car infotainment systems, ride-by-wire controls, and other vehicle electronics that help promote elements of customization and personalization for the driver of the vehicle. The traditionalists among automobile enthusiasts may not celebrate the new wave of cars with “software-on-board,” but this makes their value even more attractive now than it was five or six years ago. As a general rule, the less mechanical components a car has, the more value that is created through the software aspects of vehicle production. This is why, among other reasons, vehicles with programmable hardware and software elements are so desirable on the market. But what happens if the programming element itself becomes obsolete? What if the service provider or manufacturer of the in-car software elements goes out of business? This is where the contractual protections of a software escrow contract come into play.
The software aspects of the in-car experience are vital to the functionality of a vehicle. In most cases, an automobile owner has multiple systems that are all interconnected in some way through the vehicle’s electrical system. Should one of these systems be damaged by an unforeseen event, how can a vehicle owner or seller know that a repair job will be effective? Software escrow contracts are designed to help users of technology acts protect themselves from these kinds of problems.
For example, if a vehicle owner derives great value from the performance of its in-car telematics system, then the owner should be able to check and verify that the telematics system is functioning properly before leasing or selling the vehicle. To offer appropriate assurances, an escrow contract should include the ability to inspect the deliverables produced by the telematics system at any time. In other words, when a vehicle owner is delivering the vehicle to a buyer, he may want to check the status and performance of a telematics software element by inspecting the earned results. Doing so can offer both the seller and the buyer or leaser of the vehicle greater peace of mind regarding the functionality of the technology. Should the software aspect of a vehicle become obsolete, it may be beneficial to retain a copy of the software code to facilitate the replacement of that aspect of the vehicle. If a driver’s preference is to keep the same operating system for a great many years, then having the source code for the operating system can be the difference between a vehicle’s functionality declining in time and a vehicle that keeps its promise to perform in an optimal manner for the life of the car.
There are multiple things that vehicle owners and sellers can do to make sure that the software elements of a vehicle are reliable when sold or resold. Among these steps, enter into a software escrow contract with the promise that if the technology fails to achieve the expected result, then the buyer or seller has a method of testing the system and determining the cause of the problem. In some situations, the source code of the program may also be released to the owner of the vehicle as part of the escrow contract, allowing for a complete remake of the operating system to ensure that the program will work properly for the life of the vehicle.
For more information on software escrow agreements, you can visit Wikipedia.