Telephone: +27 12 654 0610
Fax: +27 12 654 0590
Address: PO Box 9796 Centurion 0046
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Frequently Asked Questions (FAQ)

Q1: What is the importance of source code to the Software Developer?

A1: Software Developers are generally very reluctant to provide a user with the source code version of any software product as they wish to strictly limit access to it in order to reduce the risk of someone copying it and using it to create a competitive software product, thereby depriving the developer of licensing revenues.

Q2: What is the importance of source code to the User?

A2: Access to a software product’s source code is required for purposes of error correction, modifications and enhancements of that software. As a result, prudent users of software products want the assurance that if the Software Developer goes out of business or is otherwise unable to fulfil certain of his/her obligations, the user will be able to access the source code to correct errors, to modify and/or enhance the software independently of the developer.

Q3: Who needs a software escrow, and why?

A3: If the licensed user of a software product receives only machine code and the product is critically important to business operations; and/or the product needs maintenance and ongoing development or customisation; then a Software Escrow is worth considering. If a reseller contracts with its own customers to provide maintenance and development for a software product owned by someone else, then the reseller is advised to either have possession of source code or have the owner place it under escrow. If an investor, financing the development of a software product, wishes to improve the quality of collateral security, this can be achieved by a software escrow. If a software supplier finds that sales prospects often ask whether the product can be covered by a software escrow, having one already in place, assists in the closing the sale.

Q4: Can the Developer or User’s lawyer act as an Escrow Agent?

A4: Legally they can, but it is advisable to use an Agent that has extensive experience and focused on these specific matters. Furthermore, a lawyer would probably not be interested in providing additional services such as verification or reporting.

Q5: Does the Escrow Agent verify source code?

A5: Yes, if so required. There are several verification services available. Alternatively, the use of a well structured legal agreement will often suffice.

Q6: What about updates?

A6: Updates are made by adding to the existing container rather than breaking the seal and replacing some or all the contents. Often suppliers will keep three or four of the latest releases under escrow simultaneously because some of their users have not yet installed the most current release.

Q7: How does the User know whether updates are being kept current?

A7: A good method is to require the Developer to either refresh the escrow contents semi annually or submit a written statement to the Escrow Agent stating that the software has not been updated during that time. If the supplier does neither, then the Escrow Agent will report that fact to the User. As a minimum, our standard provides for a bi-annual activity repost to both the Depositor and Beneficiary.

Q8: Does it matter where the escrow resides?

A8: It is not recommend that any of the former Eastern Block countries be used because of the weakness of their intellectual property laws and general commercial instability. Otherwise, there is not a great deal of difference among industrialised western countries. Some users believe that it is important to have the software stored in their home legal jurisdiction so that quick access can be had if required.

Q9: What kind of storage facility is needed?

A9: We store source materials in bank vault safety deposit boxes located in South Africa, unless specified differently. Using bank vaults means that we have a virtually unlimited number of storage sites allowing for much greater flexibility in meeting the needs of our clients. The major banks have been in the vault business for decades - nobody does it better.

Q10: Is source code released immediately?

A10: First the Depositor is notified that a demand for release has been made (stating reasons why) and a short time is allowed for a response. If the supplier does not dispute the demand within the time allowed the Escrow Agent is required to release the software immediately. If the supplier replies with a dispute, the matter is referred to an arbitrator or a court whose ruling is carried out by the Escrow Agent.

Q11: What is the user permitted do with source code taken from escrow?

A11: Typically, source code may be used only for self maintenance, or maintenance of the true end user in the case of resellers. All of the restrictions on use contained in the original license should still apply. Financial investors who back development of a product often acquire outright ownership of the software being held in escrow as collateral security. Attention should also be paid to the user's right to modify the software to accommodate the needs of new development. Copyright law in some countries prohibits modifications unless that right is clearly stated in the agreement.

Q12: Who pays the annual escrow fee?

A12: The Depositor generally carries this cost, however, the involved parties can decide differently.

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