Software Escrow Specialists Since 1974

Software Escrow Specialists Since 1974

1-888-771-2042 (North America)
+1-613-842-8912 (Worldwide)
desk@softescrow.com

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Liability Limits and Insurance

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To gain a proper understanding of the forces at work on this subject it is helpful to first get a quick tutorial on patents, copyright and trade secrets.

The law recognizes patents and copyrights as intellectual property, but not so with trade secrets. A trade secret is simply a question of fact – information has either been kept secret or it has not, but either way it is not recognized by the law as property. This distinction is important because of the way in which nearly all other software escrow agreements place a limit on the liability of the escrow agent.

First they state that the escrow agent's complete liability is limited to the amount received by it as fees, a relatively small amount, which makes it very harsh for the owner of software that has been compromised by the escrow agent's conduct.

Then, in an apparent gesture of generosity, that limit is removed if the liability relates to a loss of intellectual property. But notice that the limit still applies to the loss of a trade secret, for example through an improper disclosure of source code, because a trade secret is not property. That bit of cunning misdirection is not what one might expect from a supposedly trusted neutral third party. At Lincoln-Parry there are no limits placed on liability.

Yes, we maintain an insurance policy of several million dollars to satisfy potential judgments. However, the best insurance is prevention. Because our entire company effectively goes on the line with every escrow agreement, we have a very strong incentive to make sure that everything is done right. As a result we have never lost or mishandled a single deposit of escrow materials in over 38 years of operation – a claim that few, if any, other escrow agencies can truthfully make.