FASB Gets Sued for Bruising the Economy By "Stealing" Proprietary Technology

Thursday, May 06, 2010 , , 0 Comments

 pic credit: stickynote theatre

Is FASB stealing code a la ex Goldman trader? Is it stealing if it is in the terms and conditions? Will you reconsider how you phrase comment letters to FASB from now on?

Silicon Economics, Inc. yesterday filed suit in federal district court in San Jose, CA, against the U.S. Financial Accounting Standards Board (FASB), charging it with antitrust violations and with willfully attempting to misappropriate patented technology belonging to the company (Case No. CV10-01939 of United States District Court for the Northern District of California). FASB is a private, non-governmental body, located in Norwalk, CT, that sets financial accounting standards for public companies in the U.S. A copy of the suit is available at www.siliconeconomics.com.

The lawsuit concerns Silicon Economics' EarningsPower Accounting™ (EPA™) – a patented method developed by the company to improve the accuracy, validity, and usefulness of financial statements. Silicon Economics recommended the merits of EPA to FASB in response to FASB's request for public comment on the objectives of financial accounting (No. 1260-001, July 6, 2006). FASB claims that its website terms and conditions gave it ownership of Silicon Economics' technology, even though such terms were not part of FASB's invitation for public comment or otherwise disclosed to Silicon Economics.

"FASB's unlawful attempt to appropriate SEI's intellectual property undermines innovation and competition, and harms the US economy," said Perry J. Narancic of Narancic & Katzman, PC in Menlo Park, CA, counsel for Silicon Economics, Inc., "SEI will defend its intellectual property vigorously."

(via PR Newswire)

In the complaint, Silicon Economics alleges that a 2006 comment letter to FASB led to FASB claiming a royalty-free interest in any and all information (proprietary or otherwise) sent to them via comment.

WebCPA explains:

Silicon Economics responded in 2006 to a FASB invitation for public comment on one of its proposed standards. The company e-mailed its comments, including an explanation of its patented accounting method, which involves an equation derived from the present value equation of finance and credit/debit posting procedures to calculate instantaneous end-of-period asset and liability incomes and windfalls.

The following year, SEI president Joel Jameson was surfing FASB’s Web site when he noticed the terms and conditions, which said that FASB claimed rights to any and all intellectual property sent to the board via e-mail. Jameson contacted FASB to confirm that FASB was not claiming any ownership interest in his company’s “invention,” but FASB sent no reply.

Last fall, his attorneys contacted FASB, and FASB allegedly claimed that it had a royalty-free interest in the SEI invention and patent, “and categorically refused to release any such interest,” according to the complaint.

“They claim they own it, either because Silicon Economics disclosed it to them or that they have a royalty-free license to use EarningsPower Accounting and the underlying patent,” said Perry J. Narancic of Narancic & Katzman PC, in Menlo Park, Calif., the counsel for SEI. “The Web site terms and conditions state that anything someone sends via e-mail to FASB is basically owned by FASB. There’s a problem with that argument. As a Web site, the terms were never disclosed in the initial comment that Silicon Economics had responded to, and there was no disclosure of those terms or conditions in any dealing between FASB and Silicon Economics. Legally speaking, that cannot constitute a contract. You can’t agree to a contract you’ve never seen or heard of.”

Silicon Economics also claims that FASB is one weak ass standards-setter, clarifying FASB's job in the US thusly: "Unlike other industry standards-setting organizations, such as the Internet Engineering Task Force (“IETF”), FASB’s standards-setting is far removed from industry participants and accounting practitioners, resulting in low-quality standards that are often divorced from reality."

Oh snap.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.