Barnes & Noble Inc (BKS.N) lost its bid to dismiss Spring Design Inc's lawsuit accusing the largest U.S. bookseller of illegally copying a screen design for the popular Nook electronic book reader.

Spring Design will be allowed to pursue claims accusing Barnes & Noble of misappropriating trade secrets, breach of contract and unfair competition, according to a ruling in the federal court in San Jose, California.

The ruling by U.S. District Judge James Ware on Monday evening is a setback for Barnes & Noble, which launched Nook in October 2009 to compete with Amazon.com Inc's (AMZN.O) market-leading Kindle. Spring Design sued the next month.

In its complaint, Spring Design said it had shared the dual-display design of its forthcoming Alex eReader with Barnes & Noble when the companies held talks in 2009 over a possible partnership.

Read the complete Reuters story, “Barnes & Noble fails to end Nook lawsuit.”