The Costs of Sarbanes-Oxley

No, this post is definitely not what you’re thinking. Its not about how more and more companies are looking into going private or going to markets like AIM instead to try to avoid the increasingly greater burden of legislation like SOX.  In fact, quite different altogether. Its a story about how Apple will be charging a few dollars to unlock a feature already built into one of its products. That in itself is nothing particularly earth-shattering. What is a bit wonky is the reason Apple cites. According to another story at iLounge, its because of SOX:

Another Apple representative has added details on the Sarbanes situation: it’s about accounting. Because of the Act, the company believes that if it sells a product, then later adds a feature to that product, it can be held liable for improper accounting if it recognizes revenue from the product at the time of sale, given that it hasn’t finished delivering the product at that point. Ridiculous.

I don’t purport to be an expert on SOX but I thought it had to do with internal controls, rather than accounting standards, which I thought, if memory serves, were still at least primarily driven by the pronouncements of the Financial Accounting Standards Board in the US, and not SOX.

So, if you are the proud owner of Core 2 Duo Macintosh, you too will be personally experiencing the cost consequences of SOX, even if you are not a US public corporation. And you can’t even avoid it by going private. Very odd indeed.

Pretexting, Canadian Style

From one of my very smart colleagues at the firm – a recent Canadian case involving “pretexting” like activity a la HP.

The short story: A company hires an investigator to see what some former employees are up to, since they’ve started a competing business. Based on what they find out, they sue the employees. In discovery (in rough terms, the process through which each party gets to look at the information that the other side has supporting their case), the employees find out that the investigator has obtained their phone records and also has recorded them on video at their business premises, in both cases without their consent and without a court order.

Sound somewhat familiar?

So the employees countersue the company and the investigator. It turns our that the company wasn’t aware of the methods used by the investigator and so is left off the hook, but the action against the investigators is given the green light.

Whether or not the claim of the employees will succeed remains to be seen. In the meantime, folks thinking of using investigators, for whatever purpose, would be wise to give serious consideration to the nature of information that they want to collect.

Microsoft Patents RSS. Or Tries To. Maybe.

Interesting post on someone else’s blog about Microsoft apparently trying to patent RSS:

The applications, filed last June but just made public yesterday, cover subscribing and discovering what Microsoft calls “Web feeds.” That comes as a bit of a shock to anyone who’s been working on RSS, which has its origins in a format developed seven years ago at Netscape Communications.

Microsoft executive Don Dodge, while not involved in the patent applications, says he suspects the filings were made to defend the company against “patent trolls”. (The filings were made shortly before Microsoft announced plans to build RSS technology into its upcoming Vista operating system.) Still, if granted, the patents would give Microsoft a legal cudgel to wield against other companies using RSS.

Well. They do have a point. Generally speaking, I don’t think patent trolls (those that basically file overly broad patents and then sit on them in a dark cave until someone who actually does something useful, and therefore has deep pockets, unwittingly infringes, at which point the troll comes out and clubs them over the head with a lawsuit or settlement) are a good thing. That being said, its ironic that Microsoft feels the need to abuse the system in the same way as patent trolls in order to proactively defend itself. It will be interesting to see how things turn out.

Unfortunately, I’m not necesarily sure that prior art would necessarily invalidate these patents – after all, most of NTP’s patents were more or less considered invalid, but that didn’t stop them from collecting several hundred million from RIM. And its not like there haven’t been other, um, rather broad patents asserted in the past. You know, like back in 2002, when British Telecom asserted ownership of hyperlinks (which they lost) though of course BT doesn’t quite fit the description of a patent troll.

Then again, it begs the question as to who or what should or shouldn’t be considered a patent troll – for example, its well known that IBM has a huge, gigantic, enormous arsenal of patents at its disposal. IBM also actively licenses these patents (and of course threatens litigation where it believes its rights are being violated), but it isn’t necessarily the case that IBM would otherwise have exploited these patents in what I’ll call “active” business – i.e. making and selling something based on the patent as opposed to primarily seeking royalties and licenses from those do – even though IBM does do so in some cases. So does that make IBM a patent troll? What about Philo T. Farnsworth who, arguably, never started producing televisions but instead sought legal claims against others?

My perhaps overly simplistic take on this is that patent trolls are not inherently the problem, but rather the ability, primarily in the US, to register patents that should have never issued in the first place. If someone comes up with a smart, cool, inventive, and truly novel way of doing something, then they should certainly be free to either produce something with it, or sue the living daylights out of someone else who comes along and infringes the IP even if they don’t (or can’t) make productive use of it themselves. Not actively exploiting a patent is not necessarily tantamount to being a bad guy, IMHO.

It will be interesting to see what happens on this front, if anything. If nothing does, then I may well turn to drafting patents, the first being “Method of Utilizing a Rhythmic Cadence in the Expansion and Contraction of Multiple Muscular Groupings to Faciliate Indefinite Continuation of Metabolism of Cell Structures.” I like the sound of that. Yes indeed.