So what would happen if your IT contractor went into liquidation? It could be your IP horror story. In a disturbingly high number of cases, IT services contracts specify that where software solutions are custom-made for an enterprise, they are owned by the contractor, not the enterprise. This means that in a liquidation scenario, ownership of the software will vest with the liquidator.
Your new IT contractor will need to have access to your software, and preferably a license to tinker with the source code. Without these things, not only does switching contractors become an impossible transition, but any modifications to your software solution may lead to a breach of the liquidator’s IP.
Of course, the best way around this is to have complete IP ownership over your software solution. However, not many IT companies will concede this during contract negotiations. A halfway house approach is to have IP escrow provisions in your agreement. Under these:
· The IT contractor is required to data-dump the source code for the software to a third party, called the escrow agent.
· The escrow agent holds the source code and makes sure that the IT contractor updates it regularly (say, on a six monthly basis).
· If the IT contractor becomes insolvent, the escrow agent is required to release the source code to you.
· A license is granted to you and your newly appointed contractor for your use of the software in these circumstances.
These provisions have to be carefully drafted, and it is critical that the escrow agent is contractually obligated to release the source code to you if the IT contractor becomes insolvent. Our usual recommendation is that any IT escrow arrangement is a separate agreement entered into by you, the IT contractor and the escrow agent. This is so you can directly enforce that obligation if required.
No comments:
Post a Comment