Posted on 04/04/2006 10:59:40 PM PDT by stainlessbanner
Online DVD rental company Netflix on Tuesday sued rival Blockbuster for patent infringement, asking a federal judge in Northern California to shut down Blockbuster's 18-month-old online rental service and award Netflix damages, according to a copy of the filing.
Blockbuster declined to comment, saying it had not received a copy of the lawsuit.
Netflix, which was founded in 1999, holds two U.S. patents for its business methodology, which calls for subscribers to pay a monthly fee to select and rent DVDs from the company's Web site and to maintain a list of titles telling Netflix in which order to ship the films, according to the patents, which were included as exhibits in the lawsuit.
The first patent, granted in 2003, covers the method by which Netflix customers select and receive a certain number of movies at a time, and return them for more titles.
The second patent, issued on Tuesday, "covers a method for subscription-based online rental that allows subscribers to keep the DVDs they rent for as long as they wish without incurring any late fees, to obtain new DVDs without incurring additional charges and to prioritize and reprioritize their own personal dynamic queue--of DVDs to be rented," the lawsuit said.
The lawsuit says No. 1 U.S. rental chain Blockbuster, which launched its online rental service in 2004, was aware that Netflix had obtained a patent for its business method and was seeking a second, but willfully and deliberately violated the existing patent.
Netflix, which is represented by the San Francisco law firm of Keker & Van Nest, is demanding a jury trial and asks that Blockbuster Online be enjoined from using Netflix's business method and be forced to pay damages and court costs.
"We felt it necessary to take this action to protect our rights as inventors of the very unique business methods that Netflix offers," Netflix spokesman Steve Swasey said on Tuesday.
"Netflix created a very unique service, from the dynamic queue, to the idea of letting subscribers keep movies as long as they want with no late fees, to the idea of allowing customers to get new DVDs as soon as they return old ones," Swasey said.
Since launching its online rental service in August 2004, Blockbuster has poured more than $300 million into setting it up and marketing it.
But a debt load of more than $1 billion and weakness in its primary business of store-based movie rentals forced the Dallas-based company to cut back its marketing investments this year in Blockbuster Online, which has 1 million subscribers, compared with 4.2 million for Netflix.
Shares of Netflix closed down 72 cents to $27.41 a share on Nasdaq before the suit was reported, while shares of Blockbuster fell 8 cents to $3.80 on the New York Stock Exchange.
Wedbush Morgan analyst Michael Pachter, who also is an attorney, said it was unclear whether Netflix's challenge to Blockbuster's online service would be upheld by the federal court.
"It's my opinion that it won't be," Pachter said. "Blockbuster detrimentally relied on their silence as consent. If in fact (Netflix) feels so damaged they should have sought injunctive relief before Blockbuster rolled out its service."
You can patent a business practice? Who knew? Perhaps Microsoft should go back and patent its practices and avoid all that monopoly stuff.
M$ has a patent for "tabbed browsing" and "double click." I think eBay has the "buy now" button patented.
Who knew !? Man - that *crap* has been going on forever. You think it's a coincidence that there's a childrens play area only in a McDonalds ? I've yet to see one in another fast food restaurant.
By the way, in my opinion, business practice patents are *complete* boloney. Oh, so I decide to resell widget X by running around screaming and naked, patent my running around screaming and naked while selling X, and now, voila, you can't do that. Oookkk...
"M$ has a patent for "tabbed browsing" and "double click.""
They really have a patent for tabbed browsing. I find that laughable considering Mozilla has had it for years and IE still doesn't have it.
There is one at my local Burger King.
AOL filed patent violations for buddy list and instant message. I don't believe they won, so I doubt Netflix will get far. Otherwise you have a monopoly situation; ie: only one company could make fast food burgers delivered through a drive through window.
is 7 out yet, I've got 7 beta installed and its pretty terrible.
Does Netflix have a patent on slowing down processing so frequent renters can't get as many movies?
Hmmmh... must have expired. In either case, business practice patents are the craziest idea I ever heard of.
I think they have an add-in/plug-in for IE version 5 or 6 that does tabbed browsing, but I don't use IE.
I agree. Now, if Netflix patented their envelopes, etc, and Blockbuster infringed on that patent, they may have a case.
But, how many companies out there use return postage, etc?
Oh, and I think the Burger King in the next town over has a play yard thing too. And these are fairly old stores.
Oh, and Dairy Queen in the town where I grew up.
Well, there's 'differences' to the ways those things can be organized to get around the patents... I'd have sworn McD's had one on that... well anyway.
If you can't compete... take them to court.
Will Blockbuster bust their block
By the time that turd finally plops to earth, will there be anybody left to care? Whoopee - tabbed browsing.
Firefox rox, and everybody knows that.
I WONDER WHO HAD THE FIRST DRIVE THRU?
WHO HAD THE FIRST FOOD DELIVERY SERVICE?
WHO FIST PUT FOOD IN PAPER BAGS TO CARRY OUT?
As you can see this pattened biz is a bunch of BS.
Maybe the Columbia House records company CD subscription division should sue netflix. What's the difference between their business models besides the data density of the discs?
I patented the letter "e." You farking, sneaky bastiches better give me my props.
>>
I WONDER WHO HAD THE FIRST DRIVE THRU?
<<
A few California places did that back in the fifties, but I believe Wendy's was the first national chain to make it a standard practice. I could be wrong, but that sticks in my memory.
Here in Wichita we have a dine in or carry out place called nuway they touted that they were the first in the 40's to employ young ladies on roller skates to deliver bags of burgers to cars. This place is so small and their business is so large they had to do some thing. People could call in or walk in and order and then have the stuff brought to their cars. They could of qualified for several business method patents.
Don't laugh, either. If it's a Dim judge you better believe that this will be a factor in final judgement. After all, what would law have to do with it.
That being said, if the patent covers the website and method of movie selection, I can see that being upheld.
As far as a business model, outside of the particulars of the Netflix website, I can't see how you can protect or justify protection of a business model. Maybe someone can explain (or I can finish reading the thread - lol!) I mean, you can't complain because someone else competes with you in the same market, that stinks of a monopoly if you've outlawed the competition.
Netflix and their "get it to you fast" lie. I would send mine off to Netflix and it regularly took 9 days to get one back, and the both the site and I were in GA.
I got tired of it and cancelled, the next WEEK I find they are doing this on purpose, because we watched and returned them promptly.
grrrrrrr
This is the only way Netflix could beat serious competition.
I'm rooting for Blockbuster in this one.
Netflix lies and throttles and has the worst attitude toward customers.
Anyone seriously entering this market should find a ready-made group of disgruntled Netflix customers.
I seem to remember Amazon.com having a patent for "one button shopping".
I dropped my Netflix subscription last week due to the throttling issue. The return center is about seventy-five miles from my home, and Netflix usually waited about a week to remove movies from my "shipped" list after I returned. I guess its a lot easier to provide unlimited rentals when you're intentionally slowing down the service.
Kind of like McDonalds trying to patent a double cheeseburger.
Huh - I never knew you could patent a business process. Live and learn.
Only occasionally do I have that problem with Netflix. About once per month, I guess. I'm in GA also. Usually, the movie is logged in the next day, and next one is shipped.
I usually turn my movies around within a day or so. Maybe it is because I'm just a one movie at a time customer.
How did you find that they were doing this on purpose?
Now I have a reason to never use Netflix. Hope they go under.
Thank you. I had no idea this was going on. I did notice for a while, when I was a heavy user, that the movies seemed to be delayed, but I didn't give it any thought.
Does "silence as consent" fly very far in these trials? That seems to be a frightening legal principle. How much silence equals consent? Doesn't that boil down to a principle of "whomever has enough money to defent their patents may be protected by them, the rest can kiss off"?
you said "Otherwise you have a monopoly situation,,".
A monopoly is the whole point of a patent!!
Lurking'
This "throttling" business is for the birds. I noticed too a few months back when movies that I returned took forever to be processed. Another goodie I noticed is that Netflix would often ship me movies from a California distribution center (I live in GA), so that it would take much longer for me to receive the movie and for them to receive it back from me (3-4 days shipping time each way). Completely bogus if you ask me.
Yeap, good point.
It is impossible that they could rec' it so quickly, so I have to assume they have some mechanism at the Post Office to scan and report it to their warehouse as "on the way" and they release the next movie before rec'ing the first.
If anyone knows how this works, I'd love to hear about it. Can they have scanning at every post office?
The throttling hasn't affected me too much and the NetFlix customer service is pretty good - easy to sign up, easy to leave. No hassles.
The Netflix chief of operations was the former postmaster general - maybe they have an "in"!
For the most part, I've been very happy with Netflix, but have been a victim of their anti-throttling stuff at times. I do like their selection and often am recommended movies that I had never heard of that I really end up enjoying. Their recommendations are a service I couldn't get at a local video store. I also occasionally have problems with movies getting lost in the mail (though this has only happened about three times in a year).
I wonder if this is the real tech that they want to protect with a patent?
I'm going to take out companion patents on the:
"Method of discharging urine from the bladder of a human being while maintaining privacy..."
It was probably just a matter of timing and where you put the disk to be mailed. When I got married I put the invitations in a drop box by my wife's work in the morning and some of the people got the invitations that very day about 4 hours after I dropped them in the box. Figure somebody like Netflix is getting deliveries every hour or so, if you put your return in a box with a 5PM pickup it could have been processed overnight by the PO and been in Netflix's first inbound batch.
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