Failing to secure ownership of IP means more costs on the Horizon for the Post Office

The Post Office has paid over £600 million of public money to continue using the faulty Horizon IT system, despite deciding to move away from it more than a decade ago. Their ongoing reliance on Horizon appears to stem from the fact that the original deal with Fujitsu in 1999 did not give the Post Office ownership of the intellectual property (IP) in the system’s software. Without ownership of the code, the Post Office had no ability to inspect or modify it, especially the part that processed financial transactions. This meant that they had to rely on Fujitsu’s assurances about the software’s functionality, which, as we now know, was faulty and contributed to hundreds of wrongful convictions of sub-postmasters.

Although the Post Office has tried to switch suppliers since 2012, the high cost of acquiring the software rights or building a new system has kept them reliant on Fujitsu. In 2023, the Post Office obtained rights related to the Horizon system, but it remains unclear if these include the transaction processing software. The current contract with Fujitsu is due to end in March 2026, but experts believe it will need to be extended beyond this whilst the Post Office continues to find a replacement, perhaps using these newly licensed rights, but at what further cost to the taxpayer? 

This matter highlights the critical importance of:

• Securing ownership of IP, especially in technology and software contracts. Without it, a party may be left in a vulnerable position if the supplier’s interests change or if issues arise with the software. This can lead to long-term dependence on the supplier, costly extensions, and an inability to replace the faulty system.
• Doing thorough due diligence before entering into contracts. If the Post Office had better understood the long-term implications of not owning the IP, they might have negotiated a different deal or sought alternative solutions. Ensuring that all potential risks are understood - including those relating to intellectual property - is essential.
• The need for flexibility in long-term contracts with technology providers, especially when the software or system is central to operations. This includes ensuring the right to modify, inspect, and transfer the technology if needed. The Post Office’s inability to transition to another provider or fix flaws in the Horizon system shows how rigid contracts can create legal and operational risks.
• Transparency and accountability in technology contracts. The Post Office had limited visibility into the Horizon system and had to trust Fujitsu's assurances that it was functioning properly. Legal frameworks should ensure that parties to a contract have the right to inspect and audit software and technology, especially if it is responsible for critical operations like financial transactions.

Because it did not own the code, the Post Office was also unable to inspect the part of the software that processed transactions, and had to rely on assurances from Fujitsu that it was functioning correctly.

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