Borders to Sell Intellectual Property to Barnes & Noble

Borders Group Inc., the bankrupt bookseller, won court approval for the sale of its intellectual property, including a customer database, to competitor Barnes & Noble Inc. after resolving a dispute over shoppers’ privacy.

U.S. Bankruptcy Judge Martin Glenn in Manhattan today approved the transaction after reviewing new terms between Ann Arbor, Michigan-based Borders and Barnes & Noble that will protect the privacy rights of 48 million customers.

Barnes & Noble, based in New York, won a Sept. 14 auction to buy most of the trademarks and intellectual property of Borders for $13.9 million. In addition to Borders’ trade names and the database, Barnes & Noble bought the Waldenbooks and Brentano’s marks. Including other asset sales, the auction brought in $15.8 million to Borders’ creditors.

The terms of the sale are “fair and reasonable and provide appropriate protection to privacy interests of many people who have become part of the Borders customer database,” Glenn said. The proposed sale marks the transfer of some of Borders’ last main assets.

Once the second-largest bookstore chain after Barnes & Noble, Borders has been liquidating its stores since July under a deal that sold most of its inventory to Hilco Merchant Resources and Gordon Brothers Retail Partners LLC.

Closing Stores

Borders had 642 stores when it entered bankruptcy in February and operated 399 when the liquidation began. It listed assets of $1.28 billion and liabilities totaling $1.29 billion.

Glenn adjourned a hearing on the sale last week after a privacy ombudsman said the Federal Trade Commission’s Bureau of Consumer Protection and New York’s attorney general had expressed concern about the transfer of customers’ personal information. The ombudsman, Michael St. Patrick Baxter, told Glenn today that the agreement resolved those concerns.

All former Borders’ customers will be told by e-mail that they can choose not to have personally identifiable information transferred with the sale, Borders’ lawyer Andrew Glenn, said in court today. (He isn’t related to the judge.) Otherwise, all data, regardless of when it was collected or whether customers previously opted not to share it, will be transferred to Barnes & Noble, with the exception of video titles.

An ad will also be placed in USA Today to publicize the opt-out program, Andrew Glenn said. Barnes & Noble agreed to purge any information for which it has no commercial use.

Baxter had recommended that Barnes & Noble protect personally identifiable information and not obtain any information on the genre, title or other details of audiovisual materials. The Video Privacy Act of 1988 bars the disclosure of personal information by companies that rent movies or other audio-visual media, including adult films.

The case is In re Borders Group Inc., 11-10614, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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