Silicon Economics Inc (SEI), a US research,
development and technology company, is suing the US Financial
Accounting Standards Board (FASB) for allegedly misappropriating
technology SEI recommended in a comment letter.

SEI develops and obtains patents on accounting
methods that improve existing accounting practices.

The lawsuit, which was filed in the Northern
District of California, San Jose Division Court last week, alleges
the FASB made antitrust violations, “wilfully attempting to
misappropriate patented technology belonging to the company”.

FASB rival

The allegations concern the accounting method
EarningsPower Accounting (EPA).

The patented method was developed by the SEI
and the company claims it improves the accuracy, validity and
usefulness of financial statements.

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By GlobalData

SEI said it develops technology to rival the
FASB due to a lack of innovation from the standard setter.

“FASB’s standards-setting is far removed from
industry participants and accounting practitioners, resulting in
low-quality standards that are often divorced from reality,” the
complaint alleged.

“The lack of FASB’s innovation has given rise
to discontent and the attempt by other market participants to
introduce competing financial accounting standards.”

SEI recommended the merits of EPA to the FASB
in response to the standard setter’s request for public comment on
its 2006 draft, Conceptual Framework for Financial Reporting:
Objective of Financial Reporting and Qualitative Characteristics of
Decision Useful Financial Reporting Information.

Ownership dispute

SEI said the FASB claimed its website terms
and conditions give it ownership of SEI technology. However, SEI
argues these terms were not part of FASB’s invitation for public
comment or otherwise disclosed to SEI.

“FASB’s anti-competitive act harms our company
and the public, particularly in light of the current economic
situation in our country,” SEI founder and president Joel Jameson
said.

SEI is seeking:

  • A preliminary and permanent injunction
    enjoining FASB from claiming or exercising any rights with respect
    to the SEI invention or SEI patent;
  • A declaration that FASB has no ownership,
    license or any other interests in the SEI invention;
  • Compensatory and general damages, and that
    such damages be trebled;
  • Punitive and exemplary damages; and,
  • Court costs.

Perry Narancic, counsel for SEI, said the
company will “defend its intellectual property vigorously”.

The FASB has not yet responded to The
Accountant’s
request for comment.