Kobo Sues To Keep Its E-Reader Away From Borders Buyer

Borders was e-reading company Kobo’s first — and, so far, only — U.S. bookstore partner. And when it became clear in recent months that Borders was going out of business, Kobo worked hard to disassociate itself from the failed brand. That battle isn’t over yet.

In a filing on Tuesday with a New York bankruptcy court, Kobo sought to make sure that a license for its e-reader does not end up in the hands of whoever buys the Borders brand. Kobo said that licenses held by its failed partner should not be included in the bundle of Borders intellectual property assets that are on the auction block next week.

The licenses, created under a Borders-Kobo partnership announced early last year, extend until 2013. They call for Borders to spend almost half a million dollars promoting the e-reader and to make it available in stores and online. The licenses also give the defunct bookseller access to Kobo’s trademark and its customer data.

Kobo, which sells e-books and e-readers and claims to have more than 4 million users in over 100 countries, wants to prevent whoever wins the auction from obtaining the customer data. The company may also be worried because the licenses are likely to contain an exclusivity clause that prevent Kobo from partnering with another seller. Borders at one point had an 11 percent stake in Kobo.

In its filing, Kobo says the licenses are are invalid because Borders did not hold up its end of the bargain. The Toronto-based company also says it is illegal under Canadian privacy law to transfer customer data. In an email to paidContent, Borders’ lawyer Jeffrey Gleit said the licenses are not part of the auction sale. Reached by phone, Kobo’s lawyer Michael Venditto said the parties had been in discussion but that he could not offer further comment.

Shon Lo, a trademark lawyer at McDermott Will and Emery in Chicago, said “generally, a trademark license can’t be assigned without the owner’s permission.”