Active escrow to protect IP and users

In the current economic climate, companies are more vulnerable because of increased financial and operational risks. Many organizations are dependent in their day-to-day activities on third-party technologies.

Dependency implies risk. Even established firms can suddenly run into problems resulting from unforeseen causes such as mergers or accounting scandals. Startup companies are generally considered more risky.

A company that is using technology and software applications for important business processes has to secure its business continuity in the event that the supplier is no longer able to fulfill his obligations.

In that case, an escrow agreement can offer an optimal solution, since it is a common and effective tool to protect the interests of all parties. The supplier deposits the source code and the accompanying documentation with an escrow agent.

In situations defined in the contract, for example bankruptcy or inability or failure to fulfill maintenance commitments, the user can request that the escrow agent release the deposit to his possession for internal use only of support and maintenance. Thus, the escrow arrangement provides the end user business continuity of applications without adversely affecting the supplier.

Technology escrow includes software source codes, manufacturing files, schematics, prototypes, bill of materials, and data escrow.

Israeli companies especially startups are very appreciated by customers abroad for their innovative technology, but are perceived as having higher than average risk. An escrow arrangement, managed by a reputable international escrow agent, can therefore mitigate the risks associated in the licensing transaction, and assist in closing the sale of the technology.

Quality deposit and legal right to use

Active Escrow is the modern escrow arrangement that handles all vital elements needed for an effective release of the deposited material: legal, technical and administrative. The old Passive Escrow agreement that was been handled by lawyers and bank trust companies is usually ineffective.

An active escrow arrangement assures that the deposited material can effectively generate the end user's product without having the supplier expose his Intellectual Property to the end user. In the arrangement the escrow agent, as a neutral and trusted party, verifies the deposit and thereafter follows up to receive updates and upgrades of the deposited material.

Technology escrow is also effective for suppliers. With an escrow arrangement, suppliers take a positive approach towards meeting the growing customer's needs, while protecting their most valuable know-how: their IP.

The supplier creates a positive confidence builder to his customers, sidesteps unnecessary discussions, which shortens the sales negotiation cycle.