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Netflix Calls ‘Cut’ On Blockbuster Online

Jason Lee Miller
Staff Writer
Published: 2006-04-05

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Home video rental chain Blockbuster got its own block busted by Netflix yesterday after the online rental company slapped it with a patent infringement lawsuit over Blockbuster Online.

I'm guessing the paperwork was prepared in advance, the suit was filed the same day Netflix was awarded its business model patent.

Netflix filing calls for an injunction to shut down its rival's online rental service and damages paid for the infringement. The patent mentioned in the suit covers the method in which customers choose DVD's to rent, the number of DVD's allowed at a time, and the amount of time given for their return - basically Netflix whole business model.

After Netflix launched its online service, Blockbuster suffered devastating losses that eventually caused the chain to begin shutting down retail outlets to make up for lost revenue. Last year, Blockbuster lost $588 million.

Blockbuster toyed with the "no late fees" concept and subsequently launched its own online rental service to compete. But Neflix' Steve Swasey says that Blockbuster "willfully and deliberately copying Netflix's business methods."

If Netflix is successful in the suit, Blockbuster will have to take down or radically change its online rental service and pay patent royalties. Upon the news of Netflix' litigation, the company's stock rose five percent.


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About the Author:
Jason L. Miller is a staff writer for WebProNews covering technology and business.

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