Netflix Sues Blockbuster for Patent Infringement

StrongGlad writes "Is the concept of renting movies over the Internet an original idea that deserves patent protection? Netflix claims it is, and is suing Blockbuster for patent infringement, alleging they are copying its seven-year-old online movie-rental business method. Netflix argues that it has patents covering its many online features, including allowing subscribers to keep DVDs for as long as they want without incurring a late fee, obtaining new DVDs upon return of those already watched, and prioritizing their own personal movie list. Blockbuster, for its part, has counterclaimed, insisting that Netflix is trying to monopolize the online movie-rental industry and stifle competition. Blockbuster also alleges that Netflix obtained its patents fraudulently by failing to disclose pertinent information to the U.S. Patent and Trademark Office, and further contends there is nothing original about renting videos online in the first place."

Business models?

[daeg]

Since when are business models subject to patent rights? Products, yes, but business models?

Re:Business models?

[kimvette]

Ever since it has become possible to buy a judge and/or jury.

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I'm pulling for Blockbuster

[xannik]

How exactly is renting movies online an original or novel idea? I think Netflix is feeling the pinch in their pockets from Blockbuster and is resorting to some desperate measures. I really hope the courts send a message to businesses that patent lawsuits are not just another source of income.

What a let down....

[Himring]

I'm a big netflix fan. I got into it in order to re-watch the entire xfiles series last year. I also like the story of its origins: someone finally got sick of ridiculous late-fee charges, and in answer, blockbuster lost mega business. Blockbuster countered with its own service which I thought was not doing well against netflix. This latest news seems to indicate otherwise.

But netflix using patent laws this way is crazy. Blockbuster should counter with the charge that they own the ability to perform the action of receiving monetary units for analogue and digital copies of light and audio produced theatrical and documentary events....

Classic...

[MudButt]

It was only a matter of time. Porter's model proven again. Blockbuster (like Microsoft) let its guard down and let a critical external force overtake its market-share: Substitutes.

Go ahead Netflix, kick 'em while they're down! You're the new guerrilla in the DVD rental business, and rightly so. On behalf of every poor college kid that ever got a collections notice for $4.38 for late fees that weren't paid in 4 weeks or less, I say thank you. Bury the bastards.

Re:Business models?

[jonwil]

Do a patent search for "amazon.com" "1-click"...

Re:Business models?

[RovingSlug]

This is getting so out of hand. People think technology and the internet make these things special somehow. For instance

• Imagine if McDonalds had patented drive through food.

We'd all agree that's stupid, right? Why do people think business models on the internet is any different?

Re:I'm pulling for Blockbuster

[Zenaku]

Maybe it doesn't seem original now that everyone is getting in on the act, but original and novel is exactly what it was. Know of any companies that were using that business model before Netflix? I sure don't. The fact is, it was a brilliant idea that seems obvious in retrospect, as most good ideas do. And they had to overcome several hurdles and solve a lot of problems before it became workable and profitable -- such as finding a way to send dvds through the mail without incurring overly frequent breakage, or paying too much in shipping costs to offer the service at a reasonable price.

I don't know if any of that is patentable, and I'm inclined to say that it shouldn't be, (which is too bad, because I fscking hate Blockbuster), but it might be. I'm pretty sure I've heard of other cases involving patented business methods.

For the record, I use Netflix, I like Netflix, and I hope they remain successful. It seems to me that whenever someone comes up with a great new service, some other company barges into the market, undercuts them out of existence, then jacks their prices, cuts their quality of service, and starts finding ways to force additional product down your throat that you don't want. Or ads.

That being said, I hope Blockbuster and the others remain successful too. Somebody has to keep Netflix honest and give me somewhere to turn if Netflix starts mistreating me. ;)

Patenting business models?

[Niten]

If we're lucky, this might be the case to finally set a precedent against the old formula

traditional business model + online = patent

If Blockbuster doesn't settle out of court, that is...

Re:Business models?

[rednip]

Great example, wrong company.

Actually that would make Mcdonald's patent example a better real world example, as many of these granted business model patents are just as disputable, as prior art seems to be often overlooked. Many claim that they often violate the novelty, and non-obvious requirements stipulated by patent law as well.

Re:Classic...

[truthsearch]

I'd rather see them buried by the market than the legal system.

Re:Business models?

[geoffspear]

The 1-click patent is problematic, sure, but it's not really in the same category as this one. This is more like is Amazon tried to patent selling books on the Internet.

Re:Business models?

[letxa2000]

Blockbuster is right, Netflix is wrong. I think this will be a useful case that could actually highlight just how messed up the patent system is. There is absolutely nothing novel about letting people keep a DVD as long as they want, there's nothing novel about letting them rank the order in which they want to watch them, and there's nothing novel about doing it online.

Good luck to Netflix on this one....

[Churla]

I have an ex who worked for Blockbuster for quite some time.

They were developing methods for on-line rentals and even on-demend video distribution back in about 1999 IIRC. Netflix was actually copying Blockbusters model , only doing it on line, until then. (Having late fees, etc, making people pay for postage).

They will be deperately hard pressed to prove they innovated many , if any, of these business practices, and I believe some of their patents could actually be thrown out because of being brought to the light of day like this.

I despise with a passion "business model patents" which basically say "we figured out how to do business, don't you dare try to compete with us!"

Re:Classic...

[Zenaku]

Yes, they do. They just renamed them "restocking fees" and made them flat instead of scaled to the amount of time by which the return was late.

Re:I'm pulling for Blockbuster

[kthejoker]

Yes!

Many of those hurdles could no doubt be covered by patents (such as "A Package To Mail A DVD without Breaking It") and good old fashioned business acumen ("We cut an exclusive deal with Fed Ex, and pass the savings on to you") in a way that encourages competition.

Being first matters a lot. It instills loyalty. But it's not a guarantee. And you know what? If some guy can come along and beat you at your own game, that's not inherently a bad thing. And if Blockbuster jacks up the price, someone else will just come along and compete with them, undercut them, and the cycle continues. There's no free pass in the market.

The *real* problem with NetFlix's model is that it's impersonal. It's just a DVD in the mail. Nobody cares about the color of the envelope. In fact, the NetFlix business model is the IDEAL "faceless corporation" business, because it's a

a) middle man service
b) driven by economies of scale
c) for a product everyone wants.

It's not a lemonade stand or a piano lesson. It's hegemony waiting to happen.

Re:Ben Franklin said it best...

[HoboMaster]

Unfortunately, not everyone's as cool as Ben Franklin. Especially with his use of 'd instead of ed. I love that.

Re:What a let down....

[hhawk]

They didn't do away with the late fee, they just figured out it's better for you and them (mostly them) to get a regular monthly fee out of you. There is a finate # of discs you can rent (if youw watched them as fast as you can).

In many ways its better for them if you get three disc from them and never send them back. They buy 3 new ones and you keep paying and paying for them...

Exactly!

[loqi]

Since when do politicians nip problems in the bud? Folks, this has to get worse before it gets better. Our patent system will receive the overhaul it desparately needs when:
A) There's a concrete enough financial interest that it generates a lobby.
B) Joe Sixpack is displeased with the situation.

We can all make B) appear to come a little faster by bitching to our Congress-critters every time we see an abuse like this. Remember net2phone's "method of establishing a communication channel by exchanging IP addresses" patent? Don't let this shit slide!

Patent Nonsense Business

[Doc Ruby]

Business patents are by definition monopolies. No patent should be awarded on anything that isn't a working mechanical device, at least a prototype. Descriptions of ideas, whether human readable or machine readable, are subject only to copyright. Identifying marks, like logos and slogans, are only trademarks.

These principles are obvious. Not only are they politically obvious to anyone who understands that artificial government monopolies must merely balance freedom of expression against investment protection. They are obvious to anyone in business. It's obvious to people patenting how much advantage they gain. And it's obvious to people excluded how much competition it prohibits.

Maybe now that American business is becoming at least as much a consumer of IP as a producer, these corporations will battle away the IP law imbalances that crimp their economy. Then we'll also see how obvious it is that corporations are the only "persons" which matter to the government.

Re:The patents

[duerra]

I can undertand the patent case for the envelopes that Netflix uses. That is a pretty novel invention, and one that I have not seen before. They may have a case on that one. I'd also like to hear if anybody has a good rebutall as to why that patent would not be valid.

As for the other patent, I stopped reading at "a computer-implemented approach for renting items to customers". That patent is just lunacy, and as the abstract explains it, I have no idea how it could get through the patent office. That's just plain wrong.

Re:Business models?

[DragonWriter]

I'm not sure who the first was, but up to 30 years ago, you could rent books on tape the same way.

Did they use the Netflix style mailer? Did they use the Netflix-style preference lists, or strict this-one-next queues or some other method of selecting what you get? Because those seem to be the two specific patents at issue, and doing something similar in outline but outside of the specific innovation claimed in the patent isn't clearly prior art relevant to the patent.

What about other companies doing exactly the same thing? Like DVDBarn, Intelliflix, etc.? Is Netflix suing them, too?

It may be more efficient to pursue such lawsuits in series rather than parallel, its also possible that the details of some of the similar operations avoid the specific patented processes. It may be that they've C&D'ed some of the others, and are negotiating and haven't gotten to the point of filing a lawsuit yet. It's hard to tell.