I am using JDK 6 update 1 on Windows. Test case looks like this:
public class Test {
 public static void main(String[] s) {
    File f = new File(args[0]);
    System.out.println("f = " + f);
    System.out.println("f.toURL() = " + f.toURL());
    System.out.println("f.toURI() = " + f.toURI());
    new File(f.toURL().toURI())
 }
}

When I invoke 'java Test \\sm-unwk-01.sfbay.sun.com\ss141213\foo.xml', I get following result:

f = \\sm-unwk-01.sfbay.sun.com\ss141213\foo.xml
f.toURL() = file://sm-unwk-01.sfbay.sun.com/ss141213/foo.xml
f.toURI() = file:////sm-unwk-01.sfbay.sun.com/ss141213/foo.xml
Exception in thread "main" java.lang.IllegalArgumentException: URI has an author
ity component
        at java.io.File.<init>(File.java:368)
        at Test.main(Test.java:22)

Please note, f.toURL() is *not* same as f.toURI() in the above output. f.toURL() has an authority component, where as f.toURI() does not have any authority component. I don't think there should be any authority component in that URL.

The above code was just to demonstrate the bug. We are facing this issue in a different context [1]. We are trying to get a File object from a URL when the scheme of the URL is file. The URL is obtained by calling ClassLoader.getResource(). ClassLoader.getResource() is returning file://sm-unwk-01.sfbay.sun.com/ss141213/foo.xml, which has an authority component set. So we get exception in our code. Our code looks like this:
void foobar() {
 URL url = ClassLoader.getSystemResource("foo.xml");
 if("file".equals(url.getProtocol()) {
    File f = new File(url.toURI());
    ...
 }
}

[1] https://glassfish.dev.java.net/issues/show_bug.cgi?id=3209