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What is software escrow?

Software escrow is when software source code is placed in the hands of a neutral third party, the so-called escrow agent. The agent is only authorised to release the items when certain pre-defined conditions have been met.

Who are parties involved in an escrow arrangement?

An escrow arrangement usually involves three parties: the depositor, the right holder and the escrow agent. It is a tripartite agreement.

What benefits does escrow offer?

The protection of software is crucial for the commercial success of a business. Software escrow covers the varying interests of developer and client alike.

Where are the software and documents stored?

Physical objects (such as CDs, DVDs and documents) are placed in safekeeping in the vault of a Swiss bank or of partners specialising in secure storage.

Software and data can also be delivered to swissEscrow online, in which case they are stored uniquely on servers in Switzerland. The server centre used meets the highest security standards (daily backups, fail-safe emergency power back-up systems and air conditioning, fire-extinguishing systems, strict access control and video surveillance). All data is transmitted in encrypted form.

When are software and related documents released?

The conditions under which items placed in escrow can be released are defined in advance in an escrow agreement.

What are typical conditions for release of an item placed in escrow?

  • When a software developer is not able to fulfil their contractual commitments, whether because of death, bankruptcy, ceasing trading, etc.
  • When a developer does not fulfil contractual commitments adequately.

Who verifies the content of the deposited object?

swissEscrow is not responsible for the content of an item deposited with them (data storage medium, document etc).In the case of a software or document escrow arrangement, swissEscrow puts the data storage medium through a standardised verification procedure. In addition, swissEscrow can be instructed to carry out an extended verification procedure, which can, if required, be done in the presence of all of the contracting parties.

How long does an escrow agreement last?

Software and document escrow agreements are generally signed for a period of ten years. Escrow agreements can be terminated at any time by the mutual consent of the depositor and right holder.

What happens to the deposited items or sums of money in the case of bankruptcy?

When an escrow agreement is signed the escrow agent is granted fiduciary ownership of the items deposited. Should the depositor be declared bankrupt, those items do not flow into the bankruptcy estate, but remain available for the purpose for which they were placed in escrow.

How much does escrow cost?

The cost of an escrow arrangement is made up of a one-time initialisation fee for the drafting and signing of the escrow agreement and an additional annual escrow fee. Additional services will be invoiced at cost. 

Who pays the escrow fees?

Who pays the fees for escrow services is defined in the escrow agreement. In addition the payment of escrow fees is governed by the Fee Regulations which are in force at the time when the contract is signed.

What is the difference between an escrow arrangement and a deposit in a bank?

Simply making a deposit in a bank deposit box does not meet the respective needs of the depositor and the right holder. If the depositor alone had access to the deposit box, the right holder could not retrieve the contents. If the right holder had sole access to the deposit box, the depositor would lose proper control over the deposited object. Should the depositor be declared bankrupt, an object placed in a deposit box would become part of the bankruptcy estate and would no longer be available to the right holder.

In an escrow arrangement, on the other hand, it is the escrow agent who retains control over the deposited object or sum of money, and releases it only in circumstance which have been defined in advance. The escrow agent is granted fiduciary ownership of the deposited object or sum of money, which is then protected in the case of bankruptcy.

Who is behind swissEscrow?

swissEscrow is a service of swissEscrow GmbH, 8633 Wolfhausen, Zurich, Switzerland.