New B&N, Microsoft Deal: Windows Nook Coming Soon?

Patent case settled with formation of new subsidiary

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And just like that, the patent infringement lawsuit between Barnes & Noble and Microsoft ends not with a bang, but a subsidiary.

The news over the wires this morning of the launch of a new join Barnes & Noble/Microsoft subsidiary is surprising for anyone who had been following the patent case, which alleged that Barnes & Noble, Foxconn, and Inventec, which are all involved in the manufacture of the Nook e-reader device, infringed on five patents that Microsoft holds.

Microsoft Corp. will invest $300 million in Barnes & Noble Inc.'s Nook, as well as the bookseller's college-texts division.

Microsoft filed the patent lawsuit back in March 2011, after it tried to negotiate with the Nook device makers. But to Microsoft's dismay, Barnes & Noble was extremely noisy about the case, particularly the patents Microsoft leveraged against the Nook, accusing Microsoft of launching the lawsuit against Barnes & Noble and co-defendants as an effort to derail the Android operating system and device sales, as opposed to a genuine need to protect Microsoft's innovation.

Barnes & Noble could do this in part because the bookseller had refused to sign a non-disclosure agreement when first approached by Microsoft to discuss the alleged infringement. Because of this, Barnes & Noble executives were very vocal in calling out Microsoft for what they saw as leveling "trivial" and "insignificant" patents in an effort to damage Android growth.

The case was being tried in February 2012 by the International Trade Commission, just recently the timing for a final ruling, which had originally been due last week on April 27, was postponed until October 1, 2012.

It may never be known what the final decision of the ITC would have been, since the settlement of the litigation was part of the terms of the new subsidiary arrangement. The exact terms, like most in these kinds of settlements, were undisclosed, but the Wall Street Journal did reveal that there would be "a royalty-bearing license under Microsoft's patents for the Nook, the companies said."

The case was interesting in the FLOSS community because by being the most vocal of Microsoft's patent opponents, Barnes & Noble was able to reveal a lot more insight into how Microsoft approaches potential patent licensees in its highly touted patent licensing for revenue scheme.

The $300 million investment comes at a pretty good time for Barnes & Noble, which has endured increasing losses of late. But it now raises the question of where Android on the Nook will go from here. As part of the deal, Barnes & Noble will develop a Nook app for the Windows 8 platform (there is already one for the iOS and Android operating systems), which is not exactly earth shattering.

But now that Barnes & Noble is paying an undisclosed patent royalty for each and every Android-based Nook device produced from here on out, cutting even more into the device's margins, the next question would have to be, how long until the Windows Phone platform looks like a more tempting platform for the Nook? Microsoft may really want this to happen, since the Nook would be a very strong bootstrap into a tablet market that has thus far left Microsoft far behind.

That would be a very far reach: even if Microsoft were to cut Barnes & Noble a sweetheart deal on platform licensing and make it cheaper to run a Windows-based operating system than coughing up protec--er, patent licensing fees for Nooks, there is still the perceived limitation of apps. But am no longer sure that this is going to be much of a hurdle.

An an Android-based device, Nook users have access to hundreds of thousands of Android apps, with the AppBrain site citing a total of 435,985 apps (though it classifies 31 percent of those apps as "low-quality"). According to the WP7 Applist site today, there are currently 79,588 apps in the Windows Phone 7 marketplace, though 10,686 are categorized as inactive, for a total of 68,902 active apps as of this morning.

0,839 "good" Android apps versus 68,902 active Windows Phone 7 apps seems like a pretty big disparity… until you think about how many apps the average user will be carrying on their phones. A 2010 poll, for instance, showed that Android users loaded 22 apps per phone and Windows Mobile an average of 13. (iOS, by the way, beat them both handily with 37 apps per phone.) Those numbers will have likely increased on all the platforms in the ensuing two years, given the increase of device memory and the release of Windows Phone 7, Android 4.0, and iOS 5 since then. But even so, we're talking, what, a max of 60 apps on average be device?

Suddenly, discovering 60 good apps out of 68,902 doesn't seem to be all that much of a big deal.

Of course, this is highly subjective: Windows Phone 7 will have to come up with the "right" apps. If a new app is the hot thing on iOS and Android, then Windows Phone had better have it fast. But if Microsoft can go to potential app developers now and say, "look, here's a tablet that has a proven record of sales, and even a brick-and-mortar storefront to show off your apps and the devices on which they will run," suddenly the idea of a Windows-based Nook doesn't seem all that far-fetched.

Otherwise you have a situation where Microsoft is investing in a new venture that relies solely on non-Microsoft tech. How long do you think that will last?

Read more of Brian Proffitt's Zettatag and Open for Discussion blogs and follow the latest IT news at ITworld. Drop Brian a line or follow Brian on Twitter at @TheTechScribe. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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