Bankrupt mega-retailer Kmart managed to sell its Bluelight.com ISP to NetZero owner United Online Wednesday after satisfying Microsoft, which had fretted in court that software licenses might be transferred without its permission, Reuters reports.

Kmart filed for Chapter 11 bankruptcy protection back in January. The $8.4 million sale of Bluelight created some controversy among several of the big-K's creditors who filed motions to get a piece of the action. MS filed its own motion claiming essentially that a company has no business selling its property without Redmond approval whenever licenses for its Great Software might be transferred.

US Bankruptcy Court Judge Susan Sonderby overruled Kmart's creditors. The states of California, Illinois and Washington were looking to squeeze a bit of tax money out of the transaction, and J.P. Morgan and other creditors were looking for some debt repayment.

Kmart got MS off its back by specifying which licenses would be transferred and providing proof of ownerhip.

Back in the go-go days of dot-com hysteria Bluelight was valued at nearly ten times its current firesale price. Proceeds from the sale will be applied to daily operations, Kmart said. ®