Drafting a source code escrow agreement

Drafting a agreement providing for the delivery of source codes of a software to an independent third party.

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The deposit or escrow of source codes with a third party depositary ensures that the processes carried out from a software are preserved over time and protects the licensee against possible default on the part of a supplier.

To protect themselves, among other things, against the bankruptcy of a supplier, any company that entrusts its IT development to an external firm should require the deposit of the source codes of the developed software with a depositary when it remains the complete and exclusive property of the supplier and the supplier retains the copyright and all other intellectual property rights.

The supplier should normally commit to depositing with the depositary the source codes, technical documentation used for the design and development of the software, and, if applicable, all tools necessary for the development and compilation of the source version, no later than 15 days after the date of the license agreement and for each software update. The source codes and documentation must be deposited in the form of a CD-ROM or any other medium with the prior written consent of the licensee and the supplier. As soon as an update or a new version of the software has been installed by the supplier at the licensee's premises, the supplier must deposit with the depositary the source codes and the source version of the program corresponding to this update.

The licensee may at any time verify any deposit made by the supplier with the depositary, in order to determine in particular whether the deposited documentation constitutes the most recent source version of the software and documentation. The depositary will in no case be obliged to verify whether the goods delivered or deposited constitute, in terms of their content, the goods that were supposed to be deposited with it under the escrow agreement.

The depositary and its personnel are also bound by confidentiality obligations. The depositary undertakes, with the supplier and the licensee, to take the necessary measures to ensure that all members of its staff at all times comply with the obligations set out in the escrow agreement.

The draft of the deposit agreement proposed by the depositary includes default clauses on the part of the supplier, including but not limited to:

  • the existence of a blocking breakdown;
  • the liquidation of the supplier;
  • the filing of a concordat proposal by the company;
  • the cessation of business or commerce by the supplier.

The deposit of the source codes and documentation of the software with the depositary, under the deposit agreement, does not prevent or restrict the right of the supplier to grant guarantees to its creditors or to encumber them with security interests.

Any dispute arising from or in connection with the deposit agreement or following it will be settled and finally decided by arbitration in accordance with the provisions of the Quebec Code of Civil Procedure.

The fees for the drafting of source code escrow agreements are billed at an hourly rate.

Therefore, it is important to consult a specialist in contract drafting, such as Notaire-Direct, as they are specialized in this field.

If you need more information on this service, please contact us
514 374-4303
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