Microsoft is set to invest $300 million in Barnes and Noble's Nook business, Microsoft announced Monday. With that investment, Microsoft will have a 17.6 percent stake in a newly formed subsidiary that will handle B&N's digital and college bookstore businesses, and the partnership will result in a Nook application for Windows 8.

B&N announced in January that it was exploring a "strategic separation" of its digital business. The formation of Newco, the subsidiary that will contain the company's digital and college textbook businesses, could be a first step toward spinning off its digital business entirely.

Representatives for both companies expressed enthusiasm for using the Windows 8 Nook application. Andy Lees, president at Microsoft, said the app will "accelerate e-reading innovation across a broad range of Windows devices," while William Lynch, CEO of B&N, said the partnership will "bring world-class digital reading technologies and content to the Windows platform."

It's worth noting that there is already a Nook for PC app (as well as apps for Android, iOS, and Mac); this suggests that the Nook app may have a far broader range of functionality than just being a vector for e-reading. That the new subsidiary also includes B&N's textbook business may indicate that Microsoft and B&N are looking to compete with Apple in its recent push in the e-textbook market.

As a result of this partnership, Microsoft and B&N have settled their patent disputes. Going forward, B&N and Newco will have a royalty-bearing license under Microsoft's patents for its Nook e-readers and tablets.