Although Barnes & Noble was the winning bidder for the intellectual property assets of long-time competitor Borders, getting them, particularly by the September 30 deadline, is turning out to be a lot harder than the 9-hour auction. In part because of privacy issues raised by consumer privacy ombudsman Michael St. Patrick Baxter in his report, judge Martin Glenn opened Thursday afternoon’s hearing saying, “We can proceed. But don’t expect that you can get a result.”
The sticking point involves changes in privacy law that took place in May 2008 and whether Borders can actually sell those 45 million customer names and information about their purchases. From the judge’s perspective even if he were to approve the sale, attorneys general and the Federal Trade Commission could stop it. Barnes & Noble attorney Paul Zumbro said, “I think they would say that they approve. Our client is a strong corporation. We were the winning bidder. We think we represent the best purchaser for the estate.” Venting his frustration at the possibility of the sale falling through, Borders attorney Andrew Glenn said, “I think we’re to some extent dancing on a pin.”
Judge Glenn made several suggestions to insure customer privacy, including an e-mail blast from Borders enabling consumers to opt out. Andrew Glenn agreed that Borders could do that. From a commercial standpoint, Zumbro said that Barnes & Noble would prefer to send out the blast. During a recess some progress on how privacy laws affect the IP sale was made. The judge added a hearing to try to resolve the issue on Monday afternoon at 4 p.m., but has no other time on his calendar before next Friday’s deadline.
Unlike the IP sale, the second round lease auction for large-format stores was quickly dispatched. Like the first auction for small format stores, there were very few participants. Only ten leases were affected, seven for termination and the other three for assumption by the landlord’s affiliate; a designee of the landlord, which in Annapolis was Forever 21 Retail; and one third party. And only the Borders store in San Juan, Puerto Rico, received more than one bid. It will net the estate $425,000. Among the stores seeking termination agreements were ones in Boston; Orland Park, Ill; Warrington, Pa.; Eugene, Ore.; Lee’s Summit, Mo.; and Peoria, Ill.
