(Updated from Monday to include Sony's announcement of the launch of a new eBook device Tuesday morning.)

NEW YORK (

TheStreet

) -- A day after

Barnes & Noble

(BKS) - Get Report

announced its latest venture in the electronic-book business,

Sony

(SNE) - Get Report

says it will launch a device that can wirelessly download books and newspapers.

The company's Daily Reader will be on the market by December and will retail for $399. The gadget, which runs on AT&T's 3G network and sports a seven-inch touch screen, is expected to pose the biggest test yet to the dominance of

Amazon.com's

(AMZN) - Get Report

Kindle.

In one interesting innovation, Sony said it's partnered with a slew of municipal libraries, a link-up that will allow readers to borrow texts via download for free for 21 days.

Sony also unveiled two smaller, lower priced versions of the device: a five-inch screen for $199 and a six-inch screen for $299. Neither model will have wireless capability.

The competition has been heating up in the e-reader market.

On Monday, Barnes & Noble made another move in its bid to keep pace in the electronic-books war by partnering with a small Dutch firm called

Irex Technologies

, which plans to unveil an eReader later this year.

Barnes & Noble has agreed to stock the Irex device with more than 750,000 electronic titles from its eBookstore.

Irex, which keeps its U.S. headquarters in Westlake Villlage, a Los Angeles suburb, did not specify whether the deal was exclusive.

"Signing this deal with Barnes & Noble positions Irex well in terms of content, and we'll team with other industry leaders to provide the network infrastructure and retail presence," said Kevin Hamilton, North American CEO of Irex, said in a statement.

Irex's new device will include an 8.1-inch touch screen with stylus navigation and 3G wireless connectivity.

This is the second e-book developer to

partner with Barnes & Noble

. Earlier this summer

Plastic Logic

made a similar announcement for an e-reader that it plans to launch in 2010.

It looks as though Barnes & Noble is attempting to team up with as many e-reader companies as possible in a bid to boost traffic to its eBookstore. An exclusive deal pegging B&N to one device-maker would prevent the company from reaching as many consumers as Amazon's Kindle has already been able to gain.

Barnes & Noble has been struggling to compete with the online retailer on both price and technological capability.

--Reported by Jeanine Poggi in New York.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.