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FAQ on Source Code Escrow

What's the use of Source Code?

Source code is a necessary preliminary for the repair or modification of a program.’ All programmers will agree to that.

This is the simple reason for having the source code of a computer program. Source code is human-readable as they are written by programmers.

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What are the legal aspects on end-customer's access to the Source Code?

The software industry players are 'selling' to their clients object code only, that is in machine-readable computer language.

End-customers’access and use of the source code can be carried out only if the object code is decompiled. Decompilation (or reverse engineering) is a highly technical exercise and costly. Besides, it is lawful only if it is for error-correction purpose by a lawful user. Any other purposes such as for upgrade or improvement will be categorised as acts of infringement and can be subject to civil sanction and in post 1st April 2001 situation, criminal sanction under the Copyright Ordinance.

There is no law legalising decompilation of the object code even if the software supplier is in breach of a licence agreement (except the complaint is related to software error) or it ceases to have any business.

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How Source Code escrow protect end-user's investment?

To safeguard an end-customer's access to the source code and hence the on-going and continuous use of the computer program purchased the answer lies with the deposit of the source code with an escrow agent if an end-customer is minded to protect his investment. The escrow agent (being the custodian of the source code) will be responsible for the safe keeping of the source code and will release the source code to the end-customers if the conditions precedents in the source code deposit agreement arise.

If you have to invest huge amount of money on installing the computer program, you must consider using the source code deposit services if the software supplier has made available to you such service.

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What are End-user's consideration when subscribing to Source Code deposit service?

1. Terms and conditions contained in the Source Code Deposit Agreement. The most significant portion is under what circumstances or events an end-customer would be entitled to have access and delivery of the source code. In most situations, it would include the most obvious instance of cessation or winding-up of the business of the software supplier.

2. The obligations and duties of the custodian. The custodian is the party holding the source code in escrow according to the Source Code Deposit Agreement. It is the party you would resort to when the software supplier is no longer interested in or incapable of responding to your needs. So check with the source code deposit agreement in order to find out what obligations and duties he owns to you as the end-customer.

3. Fee and charges. There are several possible charges. The following is the most obvious types:-
☆Registration fee
☆Annual fee
☆Verification fee (optional)

4. You should note the amount of charges or fees payable to the software supplier and the custodian and charges on yourself if you have to engage expert for any of the exercises, for example a computer program expert if you want to engage him to verify the integrity of the source code.

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What are the rights of end-customers on release of the Source Code?

To know the rights are very important.

The release of the Source Code to the end-customer on fulfillment of certain condition(s) does not mean that the end-customer can freely deal with the source code. His rights towards the source code will still be subject to the terms and conditions contained in the licence agreement and especially the provisions particularly applicable to the handling of the source code. Basically, the end-customer's right to the use of the Source Code is restricted to his personal use.

Therefore, it infringes the software supplier's copyright if the end-customer chooses to exploit the source code commercially by further licensing its use to third parties.

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Can Yip, Tse & Tang be the Source Code deposit agent?

Yes.

Yip, Tse & Tang Solicitors is set up in 1994 and is one of the leading firm to provide source code deposit service in Hong Kong. Since 1996, it has been handling arrangements on source code deposit for famous network ERP and ASP computer programmes. FlexAccount of Flexsystem Limited (GEM 8050) and OMS of Grandmass Technology Limited (GEM 8108) are two examples. End-customers can protect their investment and have peace of mind by paying an economical sum of subscription money for the service.

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What are the charges of Yip, Tse & Tang?

The charges are reasonable.

Yip, Tse & Tang do not charge end-customers with set-up charges. The most apparent charge is the annual subscription fee of $5,000 for every 12 months. If an end-customer has to verify the integrity of the source code, an administrative charge of $5,000 will be levied on the end-customer.

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Can I see the form of an Source Code deposit agreement?

Yes. Just click the link below.
See the form of source code deposit agreement

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Still got questions?

E-mail to us now and ask us ytt@ytt.com.hk We reply within 24 hours.

Other means of contact:
Addresses:
Main Office: 20th Floor, China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong
Sub-office: 23rd Floor, Nan Fung Centre, Tsuen Wan, N.T.
Tel: 28668080
Fax: 28666000
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