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This section considers the role of specialist
lawyers/attorneys in the software escrow area.
When to get a lawyer involved
When it comes to setting up a software escrow legal
agreement / contract, you should speak to the following people in sequence:
- Your software vendor: Always talk to the vendor first. They may
already have an acceptable escrow agreement in place.
- The escrow business: They can help you with a draft escrow
contract if you need one.
- A lawyer/attorney.
In short, talk to your lawyer last - when you already
have a reasonable idea what software vendors and escrow businesses provide for
software escrow. It is much better if you go to your lawyer saying "I have this
proposal for a software escrow agreement. What do you think ?" rather than "I
know nothing about software escrow. Please provide me with an agreement I can
ask the vendor to sign". This approach is better for the following reasons:
- Software escrow contracts are 80% the same: These agreements
tend to be fairly standard. If your vendor has already gone to the effort of
drawing up such an agreement, the last thing they want is another one-off
special escrow contract from your lawyer.
- Know your bargaining power: Vendors should be positive about
escrow agreements (it is good for their business), but there is a limit. If you
negotiate too hard on escrow, the vendor may simply conclude your business
carries too much overhead and is not worth having.
- This is a technical IT area: A legal agreement that does not
actually work is pointless. If you have your own IT people, they need to talk
to the software vendor first about what is in escrow (see
software escrow contents). Or you may
decide to get an external IT consultant involved in this decision. You are
fairly unlikely to find any lawyer who can do this level of technical work for
you.
Where a lawyer can help
It therefore makes sense to get a lawyer involved
only in a review capacity. You can expect them to help in the following
areas:
- When you get the contents from escrow: see
escrow release conditions. The
issues here should be familiar to a typical commercial lawyer.
- Jurisdiction: The three parties to the software escrow contract
(your organization, the software vendor and the escrow supplier) may not all be
in the same jurisdiction. This issue was discussed in
software escrow services. Your lawyer
can explain the consequences of that.
- Escrow supplier terms: Escrow companies will assume no
liability if the escrow agreement goes wrong because of the actions of yourself
or the vendor. They will also limit their liability if their own actions are
less than perfect. This will be part of the escrow agreement that all three
parties sign. Your lawyer can review these contract clauses and explain to you
if they are reasonable. Your lawyer can also review what happens if the escrow
company itself goes out of business.
- Dispute resolution: Some factors here are common to any
commercial agreement. For example, the likely cost/benefit of legal action to
resolve a dispute. Some factors are technical. For example, the possible use of
a commercial arbitration service to resolve disputes of a technical nature.
Your lawyer can advise on all these issues.
Your circumstances may be different
Of course there may be unique factors in your
situation. For example you trust your lawyer to negotiate the entire agreement
from the start. Or perhaps your business has an in-house legal team that must
be completely involved. The key point remains you should co-operate with your
software vendor to secure a mutually beneficial escrow arrangement that works
when you really need it to work. Abrasive arms-length negotiations through
lawyers are not likely to be helpful for software escrow contracts.
For details of my company and
how to contact me, please click here. Frank Vipond. August
2010. |
