Software Licensing: Two Sides to Every Coin

There are two sides to every coin…

When software is licensed, there are two parties – the developer of the software and the user, who licenses it for use in their organization.

They both have a lot at stake.

Developers create software applications by using human-readable source code. This is the “secret sauce” or the company’s intellectual property (IP). This source code is compiled into binary machine code (0s and 1s) that a computer can read and execute, which in turn is transformed into executable code to be licensed. One of the reasons for this transformation is so that the intellectual property behind the software stays intact and cannot be easily copied.

As a developer of software, in addition to protecting your IP, you are concerned about closing the deal with the potential buyer, and wherever possible, offering that buyer an advantage over your competitors.

One way to do all of these things is through software escrow. When a software escrow contract is established, the software source code is placed within a secure escrow account with a neutral, trusted third party, such as Iron Mountain. This protects the developer’s IP, while at the same time, minimizes risks for the buyer in case something happens to the developer.

RedPrairie, one of our developer escrow customers, had this to say: “The ability to offer a technology escrow agreement to our customers gives us an extra layer of competitive advantage over any competitor that does not offer these services.”

On the other side of the coin is the user of software, also known as the licensee.

The user is looking for developer support, long term viability and reliability. As a user of software, you want to make sure the company that developed your software is going to stick around. When you need support, it’s important that the developer will be there long term and is a reliable, trustworthy company.

That’s why many software users insist on establishing a software escrow agreement at the same time as their licensing agreement. It helps equip users to manage unforeseen technical or operational risks.

QBE the Americas, one of our escrow customers licensing software stated, “This particular application drives our business end-to-end…  So, it was critical to the mission and stability of the company that we could rely on the source code being deposited, and being available, if something ever happened to our software vendor.”

As the escrow service provider, Iron Mountain bonds the two sides by protecting the valuable source code in a secure, neutral location, until that time when it may be needed. When Iron Mountain establishes an escrow agreement with both the developer and user of software, everyone is protected. Developers know their IP is protected and they can assure potential buyers of their viability. At the same time, software users know that their risks are minimized and they can get back up and run if something happens to their developer.

In essence, no matter which side of the coin you are on, security and peace of mind are essential.

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RELATED CONTENT:

• Learn more about the advantages of software escrow for developers at: Software Escrow: The Developer’s Edge
• Learn more about the advantages of software escrow for users at: Software Escrow: A Best Practice Against Business Interruptions
• Protect Your Intellectual Property
• Software Escrow: What Lawyers Need to Know
• RedPrairie and Software Escrow: Partners in Sales Success