Netflix Files Patent Infringement Lawsuit Against Blockbuster

AP: Netflix has filed a patent infringement lawsuit against Blockbuster.

Netflix contends it first patented the process for managing DVD wish lists -- known as queues -- in June 2003.

A second patent issued Tuesday to Netflix apparently triggered the lawsuit. Netflix believes the additional patent covers an even wider range of automated interaction with its customers.

Netflix hopes to obtain a court order that would force Blockbuster to change the way its online rental service operates or require the company to pay patent royalties -- a potentially huge bill, based on other recent patent disputes.

Video Business on the patent:

The patent broadly refers to subscription rental of movies, music and videogames and covers subscription plans in which users are allowed a specified number of items without return due dates. It primarily describes a system for Internet ordering and delivery through the mail but also claims to cover in-store subscription services and other methods.

Thanks to John & Nick for sending this in.

Comments

[disgustedwithnetflix]

This is unbelievable. Netflix thinks they can patent something as simple as renting movies by mail? Why shouldn't Barnes & Noble sue the Borders Group for daring to sell books via big box retail and have the gall to put coffee shops in the stores to boot?

Netflix is obviously afraid to compete in the free market and hope to gain - via the courts - a monopoly on movies by mail. This is just too much. I cannot describe how disgusted I am with this company. First, the treatment of heavy users - and now this stupid lawsuit that seeks to prevent competition.

I have canceled my Netflix subscription as of 2 hours ago when I first heard the news on CNN radio.

My hope is Blockbuster shows Netflix what "throttle" really means. I once admired Reed Hastings....now, I can't stand to even hear the man's name. I have washed my hands of Netflix and now sit back and watch this company continue to sink themselves with idiotic policies and actions.

Netflix stockholders: SELL!!

[Phdsvp]

Good riddance--more DVDs for me, then.

Netflix has a responsibility to their shareholders to maximize profit, and this is an attempt to do so. If they had a patent on something, they have every legal right to try to protect it. If it shouldn't have been issued, then the court will decide such.

Then again, if you knew anything about stocks, you wouldn't be yelling "sell" so quickly.

[Hunter McDaniel]

Ok, Netflix finally figured out a way to lose my sympathy.

This is BS, plain and simple. You couldn't ask for a better example of how the whole patent system is BROKEN.

[Chris O.]

Customers don't have to applaud a company's move, or stand passively by, because a company's duty is to its shareholders. If a lot of people are disgusted with Netflix's strongarm tactics such that they cancel their subscriptions, then Netflix has actually failed its shareholders, hasn't it? Customers' responses are a way to hold companies accountable for unethical behavior that is not illegal. I'm not particularly interested in whether or not Netflix is being unethical here, but if people feel they are then they should by all means cancel their accounts.

This does seem like a pretty darn ridiculous patent to issue. Here's hoping it gets thrown out.

[bobemmerich]

Anybody else read this - "patented the process for managing DVD wish lists -- known as queues" and automacially think Amazon and other have had "wish lists" for years? Maybe Netflix can sue Santa claus for al those children's letters he gets with their "wish lists" enclosed.
I know, it's about "queues" and not "wish lists", I'm just commenting on what the article said, and why would they say such a stupid thing, a "queue" is NOT a "wish list". Well maybe in Blockbusters case, where you wish you would get them in that order, he he

[Harrie]

I think i'm going to get a patent on an ordering service where people pull up through their car and order food and have the option of ordering full meals.

*rolls eyes*

I think netflix is shooting themselves in the foot with this one. Will be interesting to see how it turns out.

[noe638]

I think your anger should be at the way patents are granted and the loose interpretations of patent law. If Netflix did not patent it, Walmart or Amazon, or BB certainly would have. Can't blame Netflix for this one...

Incidentally, they have 100's of other patents (many sillier than this one)...

http://www.econtentmag.com/Articles/ArticleReader.aspx?ArticleID=4658
http://www.martinandalex.com/blog/archives/2004/07/netflix_patents.html

[barcodez]

As disgusting as I think it is, it's a problem, not just with Netflix but everywhere. I heard some company was trying to patent the double-click. And Apple thinks it owns Menus. The problem isn't with these companies, it's with the patent office which is overwhelmed and technically behind. They need to make decisions based on commonality of an idea. Go back to the basics and patent blueprints, not just concepts.

[CashForFlow]

I don't understand why a company should not take advantage of a legal option. Here's a thought - what if Blockbuster had the chance to patent the idea beforehand? No one seriously believes Blockbuster wouldn't try the same tactic.

[Chris O.]

Well, it seems like corporations have certainly done a good job of training people to expect them to act like jerks, to the point where we see nothing wrong with it. It is indeed possible for us to both think the law sucks and that companies suck for abusing it.

Newest thought: Maybe they want to get Blockbuster to settle the suit rather than get dragged through court.

[disgustedwithnetflix]

Oh, well if the law allows it, it's okay huh?Someone asked if Blockbuster wouldn't have done the same thing. Well, I don't remember Blockbuster going to court to enforce a patent on retail movie rentals (!). This is an indefensible move by a company that has run out of ideas. Reed Hastings should be ashamed. The way Netflix treats heavy users, customer service that ranks a zero on a 1-10 scale, can you imagine a Netflix - without competition?

[strobe32]

The problem is with both Netflix AND the patent office. This situation should NOT be happening, it is frivolous and a waste of everyone's time and money. It's pathetic to see the lengths companies will go to now to maximize profit and minimize competition. Giving the customer the option to choose between service providers helps drive a successful economy, and it seems that in their greed, many people have forgotten this simple thing.

[spira]

Obviously, they applied for this patent years ago, very possibly before Blockbuter Online even existed. I think these business method patents are extremely stupid, but I don't blame netflix for going after one any more than i blame amazon or a thousand other companies. If you're going to quit netflix in protest, you should quit shopping at Amazon (home of the famous 1-click patent), Priceline (the Reverse Auction patent), anybody who advertises on Doubleclick (the delivery, targeting, and measuring advertising over networks patent) and lots of other places. Ebay is currently at the Supreme Court level fighting MercExchange over a business method patent that covers "selling goods at a fixed price online."

Business method patents didn't used to exist. There may be some merit to some of them, but since the patent office has demonstrated no ability to recognize when an idea is "not obvious," which is the legal test for awarding such a patent, I'd like to see them go back into non-existence.

Now that Netflix has been awarded the patent, I suspect they have to use it or their stockholders will scream bloody murder and vote out the whole board of directors to bring in an adminstration who would use it. If Netlix wins - a very real possibility, unfortunately, they'll go after some of the game rental companies (I would think that the other movie rental companies aren't big enough to bother going after)

I wonder who has submitted a patent appplication for downloading movies off the web. Netflix will probably end up paying royalties to someone to do that.

If you want to fight stupid patents like this, the only way to do it is through political action. There have been bills brought up to address this, but they have faced too much opposition so far.

[spira]

Note that when I said that I thought Netflic will win, it doesn't mean that Betflix will win this motion to immediately shut Blockbuster Online down; I don't think there's a chance of that. But I do think Netflix will eventually be able to force Blockbuster into paying royalties unless the Congress or the Supreme Court intervene.

[isnoop]

Jeez, I sure hope they don't sue my PUBLIC LIBRARY next! =(

They've been doing queues for at least the past 20 years.

[dan]

There's a not-so-fine line between a registering an obvious patent as a defensive measure and suing someone for infringing your obvious patent.

[Aron]

This event was not on the radar screen for shareholders. The expectation for it was high after BB Online launched but that was 1.5 years ago. The fact that Netflix would put the patent to use against BB acknowledges BB's threat.

Courts have been enforcing business patents in the tech world, as another poster pointed out. Netflix clearly invented their business model, filed a patent to protect it, and actively developed a business around it all before BB Online was launched. I feel the odds for some concession from BB is in the cards. Sadly, it will take forever to resolve and may be anti-climactic in the end (much like the Chavez case).

[E. Craig Crawford]

"We grant patents at a level of abstraction that is unwise, ..."
Michael Crichton, author

The "not obvious" test for a patent seems not to exist anymore when one reads some patents that exist today. Yet, if a patent exists, the patent holder has legal remedy against infringement. It seems to me that infringement involves how something is achieved. A unique process, the result being something that can also be acheived by an obvious process may be something that is patentable.

So, what is so unique about this Netflix patent that it would not be considered obvious? I think a bunch of lawyers are going to make a lot of money arguing this one in court.

[gir]

I have to say - BOO!

It's okay to patent an obvious idea to protect yourself, but suing someone else for infringing your obvious idea is extorsion. It's like those people that bought up and squatted domain names that obviously 'belonged' to major corporations.

[RAYMOND KNIGHT]

This reminds when APPLE attempted to sue WINDOWS for the WINDOWS operating system. APPLE claimed that the point and click mouse system was there invention not mentioning that they took it from PALO ALTO laboratories years before. I think NETFLIX will have as much luck as APPLE did in winning the suit.

[cmmsml]

"Someone asked if Blockbuster wouldn't have done the same thing. Well, I don't remember Blockbuster going to court to enforce a patent on retail movie rentals (!)."

Does Blockbuster own a *patent* on retail movie rentals? You know damn well that they would have gone to court over it years ago if they had.

[cmmsml]

"The problem isn't with these companies, it's with the patent office which is overwhelmed and technically behind."

I agree completely. These companies are just playing the game by using the rules that are allowed. Who wasn't completely outraged by the ongoing patent lawsuit between NTP and RIM? NTP exists only as one guy who rents a desk in his lawyer's office, yet was able patent, sue and finally settle for $450 million!!!

"This situation should NOT be happening, it is frivolous and a waste of everyone's time and money."

Have you ever reviewed any of the cases moving through the courts system these days? Its rampant with frivolous lawsuits and will continue to be until the laws regarding them are changed. Why should Netflix limit the options that are available to them? If the patent office gave them a patent and the court system allows them to sue to enforce it, then (from a business standpoint at least) there is absolutely no reason that they shouldn't (everyone's moral objections aside). If BB had done it, then the cries of "foul" would be reversed.

Don't like that patent process or the court systems? Work through your political representatives to get it changed and companies will actually have to compete based on competent business plans and ideas.

[CJ]

In reality Netflix is forced to play this silly, expensive, patent game. Why? It's called "prior art" where some Patent Mill will unearth some previous patent, that is remotely related to Netflix's business methods and then sue. So, given the USA's broken patent system (nobody disputes that), Netflix is forced to obtain hundreds of ridiculously obvious patents, and then to proactively sue - this both shows they are serious, and more importantly, fends off the dreaded Patent Mills.

I'm sure Reed Hastings would rather spend money on customer service than Lawyers, however, that's not the way the game is played anymore...

[danb]

The bottom line is this: The only people guaranteed to win when patents are involved are the lawyers.

If our legal system weren't full of lawyers, and those who are sympathetic to them, then problems like the patent system and frivolous lawsuits would already be solved.

[disgustedwithnetflix]

"I'm sure Reed Hastings would rather spend money on customer service than Lawyers, however, that's not the way the game is played anymore..."

Oh, poor Netflix, it has been FORCED to sue Blockbuster and spend all this money on lawyers. And rigghht, we ALL know they would "rather" be spending the money on customer service. PLEASE.

[thattherepaul]

I respectfully disagree with these most of these postings and their aggrieved tone. I've always thought Netflix has been the company with the good ideas, and Blockbuster the copycat trying to squeeze its customers for easy money. Blockbuster initially mocked Netflix's revolutionary flat fee and queue system--and then went on to copy it, as reported recently in the San Jose Mercury-News: http://www.mercurynews.com/mld/mercurynews/business/14267461.htm

And an inferior copy it is. Blockbuster's website is boring, its service, unreliable, and its management, inept. As the latest in the seemingly unending string of Blockbuster's woes, the distraction, expense, and very possible success of a patent lawsuit seems deserved punishment for a company that first derided an industry-overturning upstart--and then copied it.

[NetflixShill]

"Jeez, I sure hope they don't sue my PUBLIC LIBRARY next! =( They've been doing queues for at least the past 20 years."

I was just about to say that. My library has had a website for 10-11 years that you could log into and reserve books/movies/CDs anywhere in the system. I think this was possible even before the internet - creating a "queue" of material you wanted and which they send to your local branch. I quit NFLX because of throttling and BS like this. I hope they die.

[NetflixShill]

"It's okay to patent an obvious idea to protect yourself, but suing someone else for infringing your obvious idea is extorTion. It's like those people that bought up and squatted domain names that obviously 'belonged' to major corporations."

If the companies had any foresight, they would have registered the domains years ago. The truth is they all thought the internet was just another fad. They deserve to pay for their short-sightedness. Why are you defending major corporations as if their claim to some word or phrase is a Natural Right? If they choose not to defend their claims when new mediums of communication are developed, that's their fault. They should pay for their short-sightedness.

[NetflixShill]

"And an inferior copy it is. Blockbuster's website is boring, its service, unreliable, and its management, inept."

An inferior copy that delivers 6-10 more discs per month than Netflix for the same money - PLUS free rentals, free used DVDs, and no throttling. I have no problem with their website. I resent Netflix's website for trying to predict my ratings and bias me with other people's. I love how BBO has so many DVDs that Netflix doesn't, like Tetsuo II, Basic Instinct DC, Casablanca SE, Wild Things UR, and Mummy Returns WS. I've never had trouble getting new release from BBO, either. Netflix sits on the new releases, holding them for new/light users.

Netflix's business model is totally obvious. There is nothing deserving of a patent. They stole their business model from the public library and the gym. The library has allowed you to create queues since before the days of the internet. And gyms use the same business model of "rent all you want for flat free" (and they also profit most on the people who get the least use of their membership).

[Super-Bat-Man]

who cares? this will be going on for another 5 years then it will get thrown out.

all it's going to do is make both companies cut costs a little to cover legal fees

[E. Craig Crawford]

"It's okay to patent an obvious idea to protect yourself, but suing someone else for infringing your obvious idea is extorsion."

Am I missing something here? Aside from having a different view of the definition of extortion, it seems to me that the only protection one has for patent infringement is to file a civil suit, or at the very least to threaten such action if another does not cease such infringement. I assume that the reference to patenting an obvious idea was unintentional.

Perhaps Netflix's goal is to license their system to BB. But, I'm largely ignorant of the facts and the possibilities here. One thing I'm sure of, though, healthy competition is good for a business and its customers. It's not smart to destroy it.

[ChicagoGuy]

The odds of using our legislative branch to correct obvious deficiencies that exist that benefit noone but lawyers are about as good as the odds of NF being honest with their customers.

Any hope of reforms to eliminate the raft of nonsense suits should be put in the context of the facts regarding the % of congress that are attorneys. The fox is guarding the hen house folks.

[FrankLev]

Thathterepaul's comments cracked me up. If Blockbuster was an "inferior copy" Netflix would not be suing.

At this point Blockbuster is doing a better job with new releases, keeping the price down, qulaity of service, etc.