Legal Ethics Opinion 1482

Confidences and Secrets: Lawyer Serving as Escrow Agent for
Computer Software Client

You have presented a hypothetical situation in which Lawyer
represents Client, a small company that develops custom software. 
Bigco hires Client at a substantial fee to modify software owned
by Client to meet Bigco's specific needs.  The software will be
licensed to Bigco only in machine-readable "object code" format. 
Concerned over Client's financial stability, Bigco demands
immediate access to the human-readable "source code" which would
be necessary to maintain the software if Client ever goes out of
business. Client refuses to divulge its source code because it
contains valuable trade secrets.  Bigco then proposes that Client
place the source code with a third party escrow agent who will
safeguard and release the source code to Bigco if Client ever
goes out of business.  Client agrees on the condition that Lawyer
is appointed as the escrow agent.

You have asked the committee to opine whether, under the facts of
the inquiry, Lawyer may accept appointment by both parties as
Technology Escrow Agent and also continue to represent Client.

In the facts you provide, the committee is of the opinion that
appointment as escrow agent and representation of Client is not
per se violative of the Code of Professional Responsibility since
the role of escrow agent does not rise to the level of an
attorney/client relationship.  Therefore, Lawyer will not be
representing multiple clients.  However, since there are
potential future conflicts between Client and Bigco as to the
material being held in escrow, the committee is of the view that
full disclosure as to Lawyer's continued representation of Client
and continued service as escrow agent must be made as to the
resulting impact on the parties should such a conflict arise. The
committee is of the further view that, should the potential
conflicts mature into actual adverse interests, it would then
become necessary for Lawyer to withdraw either as escrow age.  In
the latter circumstance, it would obviously be necessary for
Client to obtain separate counsel for the issues giving rise to a
conflict.  See LEO #332.

The committee cautions also that the situation wherein Lawyer
serves as escrow agent for the source code containing valuable
trade secrets of Client may cause additional ethical
improprieties as to the preservation of client confidences and
secrets.  DR 4-l0l defines "confidence" as relating to
information protected by the attorney-client privilege and
"secret" as other information gained in the professional
relationship that the client has requested be held inviolate or
the disclosure of which would be embarrassing or would be likely
to be detrimental to the client. The question of whether or not
the trade secrets contained in the source code are to be
considered confidences or secrets, then, is a question of law. 

If, however, the source code is determined to be a confidence or
secret of Client, Lawyer may not reveal the code unless the
Client consents or until a court orders disclosure.  See DRs
4-101(C)(1) and (2).  Since, however, the escrow agreement
specifically provides that the source code will be released to
Bigco in the event of Client's dissolution, the committee is of
the opinion that, under those limited circumstances, it would not
be violative of DR 4-101(C)(1) for Lawyer to reveal Client's
source code to Bigco.

Committee Opinion
October 19, 1992