Microsoft Invests $300M in Barnes and Noble, Settles Patent Flap

Microsoft and Barnes & Noble have entered into an agreement by which Microsoft will invest $300 million in Barnes & Noble€™s new digital and college book business, thereby settling its patent battle with the book seller, contributing to the creation of a new subsidiary and taking a 17.6 percent share of that business.

The new Barnes & Noble subsidiary, which will build on the history of innovation in digital reading technologies from both companies, has not been named and will be referred to as Newco. The partnership will accelerate the transition to e-reading, which is revolutionizing the way people consume, create, share and enjoy digital content, the companies said.

The new subsidiary will bring together the digital and college businesses of Barnes & Noble. After Microsoft€™s investment, Barnes & Noble will own approximately 82.4 percent of the new subsidiary, which will have an ongoing relationship with the company€™s retail stores.

Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft€™s patents for its Nook e-reader and Nook Tablet products. This paves the way for both companies to collaborate and reach a broader set of customers. Microsoft filed a patent infringement lawsuit against Barnes & Noble last year.

One of the first benefits for customers will be a NooK application for Windows 8, which will extend the reach of Barnes & Noble€™s digital bookstore by providing one of the world€™s largest digital catalogs of ebooks, magazines and newspapers to hundreds of millions of Windows customers in the United States and internationally.

The inclusion of Barnes & Noble€™s college business is an important component of Newco€™s strategic vision, Barnes & Noble officials said. Through the newly formed Newco, Barnes & Noble€™s Nook Study software will provide students and educators a key technology platform for the distribution and management of digital education materials in the market.

€œThe formation of Newco and our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the Nook business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments,€ said William Lynch, CEO of Barnes & Noble, in a statement. €œMicrosoft€™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.€

€œThe 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, a president at Microsoft, in a statement. €œOur 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.€