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?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.