Microsoft scraps Nook suit, enters e-reader business

Microsoft is to dive into the thriving e-reader market, after it stopped suing Barnes & Noble and went into partnership with the bookseller instead.Microsoft had been in litigation over Barnes & Noble's alleged infringement of Microsoft patents in its Android-based Nook tablet, but on Monday the companies announced the end of the legal battle and the start of a strategic partnership around digital content.

Microsoft is to dive into the thriving e-reader market, after it stopped suing Barnes & Noble and went into partnership with the bookseller instead.

Microsoft had been in litigation over Barnes & Noble's alleged infringement of Microsoft patents in its Android-based Nook tablet, but on Monday the companies announced the end of the legal battle and the start of a strategic partnership around digital content.

The deal will see Barnes & Noble expand its international business, although an entry into the UK market has not yet been confirmed. The book merchant intends to spin off a new digital-focused subsidiary, currently codenamed Newco, and Microsoft will invest $300m (£184m) in it for a 17.6-percent equity stake.

Newco will produce a Windows 8 Nook app, making Microsoft's tablet platform a direct rival to Amazon's wildly successful, Android-based Kindle Fire.

The Windows 8 Nook app will "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 US and internationally", the companies said in a statement.

"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," Microsoft president Andy Lees said. "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."

The agreement ending the patent suit gives Barnes & Noble and Newco a royalty-bearing licence for the patents. "This paves the way for both companies to collaborate and reach a broader set of customers," Microsoft and Barnes & Noble said.

The licensing agreement covers the Nook e-reader and Barnes & Noble's tablet products.

A Microsoft spokeswoman was unable to confirm on Monday whether Nook devices and apps would be coming to the UK. The Nook tablets are currently US-only, although Barnes & Noble has been mulling over an international rollout for some months now.