Microsoft, Barnes & Noble Settles Patent Dispute; Formed New Subsidiary to Accelerate the Transition to e-Reading

Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, as both the companies formed a strategic partnership, to accelerate the transition to e-reading, through a new subsidiary "Newco," which'll bring together the digital and College businesses of Barnes & Noble.Among others, one benefits for customers will be a NOOK application for […]

Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, as both the companies formed a strategic partnership, to accelerate the transition to e-reading, through a new subsidiary "Newco," which'll bring together the digital and College businesses of Barnes & Noble.

Among others, one benefits for customers will be a NOOK application for Windows 8, which'ill extend the reach of Barnes & Noble's digital bookstore by providing one of the world's largest digital catalogues of e-Books, magazines and newspapers to hundreds of millions of Windows customers in the U.S. and internationally.

In a April 30 blog post, Microsoft announced that it will make a $300 million investment in Newco at a post-money valuation of $1.7 billion in exchange for an approximately 17.6% equity stake. Barnes & Noble will own approximately 82.4% of the new subsidiary, which will have an ongoing relationship with the company's retail stores.

"Barnes & Noble and Newco will have a royalty-bearing license under Microsoft's patents for its NOOK eReader and Tablet products. This paves the way for both companies to collaborate and reach a broader set of customers."

"The shift to digital is putting the world's libraries and newsstands in the palm of every person's hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content," said Andy Lees, President at Microsoft. "Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We're at the cusp of a revolution in reading," adding he said.

"Microsoft's investment in Newco, and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business," said William Lynch, CEO of Barnes & Noble.

Barnes & Noble has not yet decided on the name of Newco.