In a press release released on Monday, Microsoft and Barnes & Noble announced the end to their courtroom hostilities with the settlement that sounds a lot like Microsoft bought their way into a royalty license arrangement.
Let’s parse the announcement, starting with its last line: “… and moving forward, Barnes & Noble and Newco [a new entity, not yet named, which will have 18% Microsoft ownership] will have a royalty-bearing license under Microsoft's patents for its NOOK eReader and Tablet …” The license is a critical element for Microsoft, which continues to tout that over 70% of the Android community is paying them a license fee for the system software that contains the Microsoft kernel (see here for background). This is another notch in the Microsoft royalty-stream belt. Of course, Motorola Mobility (read Google) is still a major hold-out.
As part of the agreement, “Barnes & Noble and Microsoft have settled their patent litigation.” What it doesn’t say, but which has to have been a motivating factor, is that the antitrust part of Barnes & Noble’s complaints has also gone away. Both in Europe and in the U.S., the anti-competitive features of patent litigation, sales and transfers have increased the sensitivities of regulating authorities’ antennae.
Microsoft is paying a hefty price ($300M), in effect valuing the new entity at $1.7B, more than B&N has been worth for some time. This puts Microsoft into the eReader business in a significant way; can a major emphasis on e-content be far away? That Amazon was a common competitor undoubtedly greased the negotiations.