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Netflix Sues Blockbuster in Patent Dispute

April 5, 2006

• Congress Ponders Do-It-Yourself Movie Editors • Movie Piracy Rising Faster than Predicted • Hollywood's Revenge: Studios Sue Alleged Counterfeiters • Netflix Sues Blockbuster in Patent Dispute • Legally Downloadable Movies Come With Heavy Restrictions • MovieLand Denies It Pipes Spyware Onto Users' Computers --- • More about Entertainment

Netflix, which changed the video rental habits of millions by delivering movies by mail, is suing Blockbuster, charging the video store chain infringed on its patent when Blockbuster began offering movies by mail.

Netflix said it holds two U.S. patents covering its business model, which charges subscribers a monthly fee to rent movies from the Netflix Web site. The patents cover the methods customers use to select their movies and the manner in which their accounts are maintained.

The suit, filed in federal court in California, charges Blockbuster knew it was infringing on Netflix patents when it launched a similar movie-by-mail service in 2004. It seeks injunctive relief, asking the court to shut down Blockbuster’s movie delivery service and pay Netflix damages.

The first Netflix 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 was issued just days ago. It 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," according to the lawsuit.

Blockbuster launched its online rental service in 2004 and the suit charges that it 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.

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