Escrow & Intellectual Property

An escrow agent is required where two parties agree to a transaction, but wishes to use a neutral and independent third party (an escrow agent) to ensure that the terms of the transaction are strictly adhered to and that funds, documents, encryption keys or source codes, are released only upon fulfilment of the conditions of the transaction.

An example of escrow services is when an institution is licensed to use computer software which is owned by the software supplier. The institution will need to know that should the software supplier be unable to support its software for whatever reason the institution has the means to continue to use the software without interruption. In such a case the software’s source code will be lodged with the escrow agent and this source code will be released to the institution on the occurrence certain events. Alternatively the source code will be delivered to the institution in an encrypted form and, again, on the occurrence of certain circumstances the escrow agent will release the encryption key to the institution so that it can unlock, and thereby use, the source code.

Another example would be where a buyer agrees to buy a plot of land only upon the understanding that the land is first granted the required planning permission.

The buyer wishes to make sure that the land is conveyed to him only with the benefit of the planning permission and the seller wishes to ensure that the sale proceeds are freely available to him as soon as planning permission has been granted. In these circumstances the escrow agent would hold the buyer’s purchase monies pending receipt of the required planning permission and would ensure that those funds are handed over to the vendor immediately upon receipt of the planning permission.

Escrow agents are used in a large number of financial transactions as well as in any number of other situations where a neutral party is needed to act as an honest broker between two contracting parties.

E-business is fast growing and there is an increasing need for alternative internet payment options due to the concerns of internet users using credit cards. There have been a number of high profile cases where websites have been targeted by hackers, who have successfully obtained credit card numbers by the million.

However, the most common type of internet auction fraud is the "invisible goods" fraud, where the seller does not actually own the goods offered for sale. The buyer sends his payment as agreed, but no goods are delivered and inevitably, he cannot contact the seller as false contact details were given in the first instance. Similarly, non-payment fraud occurs in reverse, where the buyer uses false details to induce the seller to send particular goods, but thereafter fails to make payment as agreed. This may happen where the seller agrees to payment after delivery, or where a stolen credit card is used to make payment to an escrow service, and this is not discovered until after the goods are sent. (Note that this is different from the case where there is no payment made as a result of a dispute between buyer and seller. This is not a fraud and is, instead, a civil matter).

Genuine escrow services offered online go a long way to cutting the risk of invisible goods fraud as the buyer’s payment is held in trust until such time as the seller has received the goods. The buyer then checks the goods and authorises the escrow service to release the payment to the seller. Unfortunately, a number of fraudsters have created apparently genuine websites offering escrow services in order to defraud would-be customers. Sellers follow the instructions on how to pay money to the escrow site. The escrow site then fails to pass the money on to the seller, and can no longer be contacted by either party.

Basel Escrow Services Limited has significant experience in acting as an escrow agent in a wide variety of situations by acting as a neutral party.

The benefits of using Basel Escrow Services Limited are:

1. an experienced, friendly and efficient team acting as an escrow agent to a wide variety of international financial and IP transactions.
   
2. fully licensed and regulated by the Jersey Financial Services Commission.
   
3. managed and controlled from within the neutral tax environment of Jersey in the British Channel Islands.
   
4. the established state of the art software required to provide escrow services in a complex environment.
   
5. independence and willingness to work with all top quality institutions.
   
6. total access to the extremely sophisticated infrastructure of the Jersey financial services market.
   
7. easy communication and travel between Jersey and London and the same time zone as London.

June 2008