Netflix to Blockbuster: Where’s The Difference?

Netflix, a pioneer with online movie and DVD rentals (and no late fees), says Blockbuster shouldn’t be allowed to play catch-up by stealing.

Netflix filed a lawsuit against the video retailing giant yesterday, citing infringements on the company’s patents for its online movie rental business.

“From top to bottom, Blockbuster is deliberately and willfully infringing on our patented methods,” Netflix spokesperson Steve Swasey told

“Netflix invented a 100 percent better mousetrap that Blockbuster copied,” Swasey said, referring to what Netflix calls the “dymanic queue.”

“Getting as many movies as you want, getting a movie as soon as you return one — [Our] service has been copied, really, from top to bottom,” he said.

Blockbuster spokesman Randy Hargrove refused to comment, saying the company had not yet seen the suit.

Successful patent lawsuits generally force a competitor to cease infringements or pay royalties that can mean big pay days for the patent holders. It’s a major issue roiling the technology industry these days.

For instance, Research in Motion, the makers of the popular Blackberry device, paid $612.5 million in a settlement with patent holding company NTP over a patent claim crucial to the devices. The deal saved RIM from a looming shut-down of its network in the United States.

Netflix credits its success to the invention of a business method that promised customers unlimited DVDs and no-late fees for a monthly subscription fee.

“Prior to Netflix, the only way you could rent a movie was to go to a store. And you had late fees,” Swasey said. “The purpose of patents in the United States is to protect inventors. And we’re protecting our invention,” he added.

“Whatever they’re doing, they’re doing right,” In-stat analyst Gary Kaufhold told

[Netflix] started in 1999 and it wasn’t until 2004 that they had their first million [subscribers], but once they reached that mark, they exploded,” Kaufhold said. “They’re up close to 6 million subscribers.”

To Kaufhold, there’s obviously value in a business model that generates that kind of word-of-mouth growth, value worth trying to protect.

“You have to give them a lot of credit for having the foresight to patent their business process. What good is having a patent if you don’t enforce it?”

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