Staking Out Intellectual Property Rights

By Ted Hughes, Senior Correspondent Business Profile, July 19, 2000

Software escrow is one of those terms. It's right up there with double indemnity and term life. They all have a vaguely tomb-like quality to them.

If you're not in just the right frame of mind when you hear it, you'll feel the air in the room go thick on you. As your own indifference engulfs you, the guy who's telling you about software escrow will recede into the wrong end of the telescope.

Jim Ford swims daily in the choppy waters of that sea of indifference.

But, really, once he manages to get your attention, software escrow gets interesting. Really.

Ford explains that even he was pretty baffled by the term the first time he heard it.

"I got an e-mail from a friend in Bryan who's an attorney, asking if I knew anything about software escrow. One of their lawyer's needed it for a client. I said I'd check into it."

Ford ran every trap he knew, but came up dry.

"After 15 years of legal and technical publishing in the Silicon Hills of Austin I'd never heard of this," he recalls. "I thought nobody here is doing this? It hit me like a lightning bolt."

The lightning bolt was Ford's new business idea, and that has evolved into his company, Guard-IT Corp.

What Ford has learned since he began to explore software escrow -- basically title insurance for geeks -- is that it is a rather useful tool.

Guard-IT Corp. simply acts as a trusted third party with whom a software maker, or anyone with intellectual property, can store the IP. Doing that establishes legal ownership. If a developer has investors, it's also a good way for them to secure the assets they're investing in. All this of course is supposed to minimize legal disputes should the deal go sour.

"It doesn't replace a patent," Ford says, "but if you're not going to spend the time and money to pursue a patent, go ahead and put it into escrow, because you're going to get IP protection right away."

It also is a useful way for developers who are new to the business to establish credibility with potential business partners and customers, Ford says.

"When they're in the first or second year of operation," Ford says, "a developer may have his product all developed and he's going out to sell it. It's going to hit him in the face. The first guy that's bigger is going to say: 'yeah, I love your product. You're a nice guy. But we really don't know you from Adam, and we need some assurance that our investment in your product will be covered.'"

Software escrow, Ford says, might sound like a velvet-lined tomb, but it's really just another way to protect your intellectual property. Really.

Company Name: Guard-IT Corporation

Industry: Intellectual property protection

Product/Service: Guard-IT is an independent, third-party escrow company that secures intellectual property (IP), including software source code, proprietary material (e.g., databases, business plans). The escrow agreement authenticates the developer's ownership and first-use, and protects the beneficiary's investment in the intellectual property.

Year Founded: 1999

Management: Founder and CEO Jim Ford managed a number of technology, business and legal publications in print and online, including at the Austin Daily Record and the Austin American-Statesman.

Investors: Self-funded

Strategic Partners: Guard-IT has signed an agreement with PricewaterhouseCoopers, LLP, naming the software and intellectual property escrow company as a seat-holder in connection with PwC's Intellectual Property Exchanges ("IPEX"). Guard-IT also has a marketing alliance with Associates Business Services, a member of the 900-member International Business Brokers Association. The company is also in confidential negotiations with a major online B2B marketplace and a computer hardware manufacturer.

Customers: Representative technology development clients include Dark Horse Systems, Semantic Designs and Innovative Software Solutions. Beneficiaries include Micron Technology, Rockwell Software and Landata Systems, a subsidiary of Stewart Title Company.

Competitors: DSI, Ft. Knox

Fiscal Year Revenues/Profit: Would not disclose.

Strategy: Cut the "paper chase" for software developers by offering an online form to expedite their escrow. Cut out the fees and paperwork of enrolling and administering beneficiaries for the developer. The goal is to serve an intellectual property market that goes well beyond software source code. Form alliances to broaden protection for buyers and sellers of technology and intellectual property.

What Keeps Them Awake at Night: The numerous applications and opportunities for rapid growth in both domestic and foreign markets. The whole technology industry, even the general business community, is beginning to focus on the need to protect intellectual property rights and secure investments in technology and innovation. Third-party escrow will be to technology transfer what title insurance is to the mortgage industry.

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