UPDATE 1-Next Jump hits back in Borders IP lawsuit

Fri Sep 9, 2011 4:09pm EDT

* Sues Borders for fraud and breach of contract

* Says Borders' suit designed to pass blame, extract money (Adds comment from Borders)

By Nick Brown

NEW YORK, Sept 9 (Reuters) - Website operator Next Jump Inc has lodged a counter-suit against Borders Group Inc BGPIQ.PK, saying the bankrupt bookseller "duped" it into taking the blame for the weakening value of the Borders customer rewards program.

Responding to trademark infringement and other accusations levied by Borders on Aug. 31, Next Jump sued Borders for fraud, breach of contract and other transgressions. It said Borders allowed it to transfer customer accounts to its own website, but then accused it of stealing the accounts as a pretext for recovering damages.

Borders has accused Next Jump of emailing the bookseller's customers in an attempt to redirect them to its own website, OO.com. Next Jump was hired in 2007 to operate Borders' outsourced customer perks program.

Next Jump said in court papers filed on Friday that the decision to transfer the accounts was made cooperatively as a way to salvage the Borders rewards program, which was hemorrhaging members in the wake of Borders' liquidation.

Borders filed for bankruptcy in February, unable to withstand rising competition from online booksellers and e-readers such as Amazon.com Inc's (AMZN.O) Kindle and Barnes & Noble Inc's (BKS.N) Nook. [ID:nN16268041]

The bookseller is trying to sell its customer lists, website and trademarks, and has said interference by Next Jump could diminish the value of those assets.

Next Jump said in its court papers that Borders' lawsuit was an attempt to monetize the floundering rewards program, while placing the blame for its downfall on Next Jump.

"This scheme was initiated so that Borders ... could pass the blame to Next Jump, insulate themselves from liability, and lay the groundwork for a meritless lawsuit designed to extract money," Next Jump said.

The company said it was "duped" by Daniel Angus, Borders' vice president for customer loyalty, who authorized the transfer of customer accounts. Angus is named as a defendant in Next Jump's counter-claims.

Borders balked at the counter-suit, calling it a move to "deflect attention from Next Jump's improper actions."

"Borders stands behind each and every allegation made in (its) complaint," the company said in a statement. "Borders anticipates a favorable judgment with regards to this matter."

Next Jump is demanding damages and reimbursement for costs incurred in transferring Borders' customers to OO.com.

After Borders sued, Next Jump agreed not to communicate with Borders' customers or reference its rewards program on the OO.com site.

Borders, long a retail staple in shopping centers across the country, had hoped to find a buyer to carry it out of bankruptcy, but a deal with private equity firm Najafi Cos fell apart due to creditor opposition, forcing it to close its doors for good.

The bankruptcy case is In re Borders Group Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-10614. The lawsuit is Borders Inc et al v. Next Jump Inc in the same court, No. 11-ap-02567. (Editing by Steve Orlofsky; editing by Andre Grenon)

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