UNDERSTAND THE IMPACT OF BANKRUPTCY ON SOURCE CODE
Source code is the form of computer code that allows a reasonably skilled programmer to modify and change the program. It allows for support of the program and the creation of enhancements or derivative works. It is also usually considered trade secret of the vendor and not readily shared with the customer. Instead of providing the customer computer source code, the vendor will usually provide a customer with computer software in object code machine readable format only. The customer is probably fine with not having source code so long as the customer will not be making any modifications to the code. The software agreement should however cover certain contingencies.
What if the vendor becomes insolvent or bankrupt and is unable to support the software?
Without the source code it will be impossible for the customer licensee to support the computer program or engage a third party to provide such support. Most vendors will cover such contingency by placing the source code in escrow with a third party and allow for release of the source code to customers upon certain triggering events. These events may include the filing of bankruptcy by the vendor or the inability of the vendor to support the program. The source code escrow agreement should be reviewed to assure that appropriate triggering events are included and that the source code is continually updated to conform to the most current software version in use. It is of no benefit to get a release of the source code from escrow and find that it is an outdated version that is not compatible with the version in your business operations.
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