NEW YORK, Sept 26 (Reuters) - A bankruptcy judge gave Borders Group Inc the go-ahead to sell its customer information to former rival Barnes & Noble Inc after both sides addressed concerns about customer privacy.

Judge Martin Glenn approved the $13.9 million deal on Monday in U.S. Bankruptcy Court in Manhattan, four days after halting the booksellers' first attempt to gain court approval.

Barnes & Noble won the bulk of Borders' intellectual property at auction earlier in September. It will inherit the 48-million-member customer database of its one-time rival, which is going out of business after filing for bankruptcy in February.

At a hearing on Thursday, Glenn voiced uncertainty about whether Borders' customer privacy policy covered longer-standing customers and whether the sale would require customer consent. He held off on approving the deal until he could be sure state and federal regulators supported it.

The deal announced on Monday gives customers 15 days to opt out of the transfer by responding to an email that will be sent when the deal closes, Borders lawyer Andrew Glenn said at thehearing. A closing date is still uncertain, but the parties are working to close as quickly as possible, added Glenn, no relation to the judge.

The companies will split the cost of an advertisement in USA Today giving customers information on how to opt out, Glenn said. Barnes & Noble, whose own privacy policy will govern the information once it is transferred, has agreed to purge any information it deems unnecessary.

The titles of DVDs and videos purchased by customers will not be included in the transfer, Glenn added.

Borders and Barnes & Noble had tried to convince Judge Glenn to approve the deal at last week's hearing, taking issue with a report by a third-party ombudsman who recommended certain customers be given the choice to opt out of the sale.

At the time, the companies argued the sale met privacy standards because Barnes & Noble is a sophisticated company in the same business as Borders, with its own robust privacy policy.

The ombudsman, Michael St. Patrick Baxter, said on Monday he supports the latest terms and that he has not received any objections from the Federal Trade Commission or from state attorneys general.

Borders has sold assets and conducted store-closing sales since July, when it announced it would liquidate after a proposed sale to buyout firm Najafi Cos fell through.

Once the nation's second-largest book retailer, Borders could not withstand rising competition from online booksellers and from makers of e-readers such as Barnes & Noble's Nook and Amazon.com Inc's Kindle.

The IP auction raised a total of $15.8 million for Borders from multiple bidders, some of which bought licenses to use the IP in other countries.

The case is In re Borders Group Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-10614.

For Borders: Jeff Gleit and Andrew Glenn of Kasowitz, Benson, Torres & Friedman LLP

For Barnes & Noble: Paul Zumbro, Cravath Swaine & Moore LLP.

(Reporting by Nick Brown)

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