Microsoft and book retailer Barnes & Noble announced the formation of a strategic partnership in a new subsidiary that aims to accelerate the transition to e-books. This agreement also ends an year of legal battles.
In recent years, chain booksellers have been confronted with major changes brought to the market by e-books and their adoption by Amazon. Since the end of 2009, Barnes & Noble has marketed a series of e-book readers called Nook based on the Android platform. Various models came out over time until to arrive to the most sophisticated ones called Nook Color and Nook Tablet.
In March 2011, Microsoft announced a lawsuit against Barnes & Noble for alleged patent infringement by Android devices. This move was part of Microsoft policy of boasting the ownership of software patents infringed by Android and requiring manufacturers of devices that use this platform to pay royalties to avoid a legal action.
Barnes & Noble decided not to pay Microsoft. It wasn’t clear which Microsoft patents were infringed by Android devices because the agreements signed with the producers include a confidentiality clause on this point. For these reasons, Microsoft was openly accused of extortion.
It’s a fact that Barnes & Noble requested an investigation of the U.S.A. Department of Justice against Microsoft. Barnes & Noble showed which patents were allegedely infringed in Android devices and why the according to the retailer their only function is to get money from the producers of Android devices.
For a long time, Microsoft has had the policy that if you can’t fight them join them. The case against Barnes & Noble could end in a disaster therefore it was better to make a deal exchanging the license over certain patents.
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Microsoft will invest $300 million for the 17.6% of a new company that is now referred to simply as NewCo (New COmpany) of which Barnes & Noble will hold the remaining 82.4%. This company will also have a division dedicated to the Barnes & Noble’s business linked to universities.
One of the first consequences will be the creation of a Nook application for Windows 8 that will bring Barnes & Noble’s catalog on Microsoft’s mobile devices.
The announcement of the agreement brought excellent results for Barnes & Noble’s shares, whose value had an increase that reached even 85%. The value of Microsoft stock remained essentially unchanged.
Apparently, fighting against Microsoft rather than yielding to its demands for payment for the alleged use of its patents may be beneficial. We’ll see if other Android devices producers will decide to go to court and if at this point Microsoft will continue with this policy.
