Borders was one of the early investors in Canadian based Kobo contributing 5 million dollars and held a 11% stake in the company. Early on in their business relationship Kobo had granted Borders an exclusive license to distribute their e-readers in the United States. When Borders went out of business a few months ago and went to receivership to liquidate all of their assets, among their property was the license. To prevent another company from acquiring it Kobo filed a claim with the New York bankruptcy court.
Starting next week all of Borders intellectual property will be on the auction block and Kobo is trying to prevent its license to be included. The company said that licenses held by its failed partner should not be included in the bundle of Borders assets. In its filing, Kobo says the licenses are are invalid because Borders did not hold up its end of the bargain. It is also illegal under Canadian privacy law to transfer customer data.
The original licenses were granted to Borders to promote the Kobo e-Reader in its USA based retail setting. It entailed spending $500,000 in promoting brand awareness and expires in 2013.
Kobo has been one of the darling success stories in the realm of digital readers and ebooks. The company has over 2.4 million ebooks in its vast library and has many popular e-readers that have a high rate of visibility in retail settings. One of the main selling points is the device works in over 100 different countries and its not Geo-restrictive like Barnes and Noble and Amazon is.
There is a emerging pattern in Kobo investment partners going out of business and carrying licenses and Borders is only the most recent casualty. Recently in Australia stake holder RedGroup who held a minority stake in the company also went out of business. This also created a void in the land down under in having the Kobo device visible in a retail setting. Other investors of Kobo include Indigo, Instant Fame, a subsidiary of Cheung Kong (Holdings) Ltd. of Hong Kong.