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Transfer Of IP: The Clause That Everyone Overlooks

Published on 30/08/2018

It is widely known that Software Escrow protects you against the trigger events such as supplier failure and enables you to retain access to your application and continue to use it until a time when a suitable replacement can be procured.

Many people are familiar with the trigger events relating to ceasing to trade, voluntary or compulsory liquidation and your developer entering administration, but did you know that Software Escrow coverage can also protect you against your developer being merged with or acquired?

Regardless of your software developer’s situation, whether they are big or small, growing or consolidating, another developer may see an opportunity to merge with or acquire them. The quickest and easiest way for an organisation to recoup their investment once a merger or acquisition has been completed is to raise prices.

This was the situation one of our clients found themselves in only recently. The client in question was working with a small software developer who had created an application which was critical to our client’s business. Although the developer was small, they had a strong customer base, making them ripe for acquisition and a larger developer swooped in to snap them up.

As in many instances where an acquisition takes place and the target company is not commonly featured in the media, our client had no knowledge that their developer was being acquired until they received an email from the new owners outlining changes to their contract and that prices were set to increase.

Fortunately, our client had invested in Software Escrow protection which protected them against the 500% price increase the new owners imposed in order to quickly recoup their investment.

Unfortunately, the clients who had not invested in Escrow protection were not as lucky and had to either sign the new contract and pay the new fees, or immediately cease and desist using the applications.

The Escrow agreement our client had in place enabled them to retain their current contract and pricing with the new software owners for the length of their Escrow agreement. Giving them room to breathe and procure a suitable new software application.

It is often thought that Software Escrow protection only protects you against the event that your developer is unable to continue with development and support of your application but this is not always the case. If you would like to speak to our specialists about the benefits Software Escrow protection can bring to your business, please get in touch and one of our specialists will get back to you within one business day.  

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