Blockbuster and Netflix settle patent battle

After nearly a year of back-and-forth attacks from Blockbuster and Neflix, the lawsuit battle regarding DVD rentals over the Internet is finally over. According to an SEC filing by Blockbuster, the terms of the settlement between the two are confidential, but "the parties have agreed to secure dismissal of all claims in the litigation."

In August of 2003, Netflix applied for a business patent to cover its online DVD rental model, a year and a half before Blockbuster launched its own online rental service. When the patent was awarded to Netflix in April of 2006, the company was quick to sue Blockbuster for patent infringement. Netflix argued that Blockbuster was aware of the pending patent application when it "willfully and deliberately" launched its own copycat service. Blockbuster promptly filed a countersuit against Netflix, accusing the company of attempting to monopolize online rentals and saying Netflix's claims were preposterous and that there was "nothing original about renting movies or subscription rental programs."

News source: Ars Technica

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Well done "jeffbert",

If it were not for Netflix, Blockbuster would still picking your pockets for being an hour late returning a movie.

I know that different stores would be more forgiving, but the underlying policies were still intact. The "Free Market" and Netflix made BlockBuster surcome to more customer friendly practices, and you can bet BB only went kicking and screaming.

You will never see using a BlockBuster Store or service(again.)

I use both Netflix and Blockbuster online, mainly for the greater variety that I enjoy with both. However, Netflix has proven itself superior in several ways:

  1. Netflix has more distribution centers than Blockbuster. I had lived in Gaithersburg, MD, which had distribution centers for both. At that time, I could put both a NF & BB disc in the mail on Monday, & Tuesday, both discs were received by their respective companies. On Weds, I would very often have new discs from both. But, since moving to Hanover, PA, only Netflix has maintained that level of service. NF has a distribution center in Harrisburg PA, while BB's closest one is in Gaithersburg, which takes 2 days to mail to or from there to here. Thus, it takes a whole week to turn around one disc. That is, for BB to mail it to me, 2 days, I watch it, 1 day, I mail it back, 2 more days, total= 5 days=1 business week. BB Total Access helps little, if any, because I already have 100s of titles in my queues, why would I want to take time to find something in the store, whose selection is only a tiny fraction of the online service? If I merely return the disc in the store, but do not exchange it for an in-store rental, there is still no difference in the speed of service.
  2. Netflix updates the availability of discs more often. Why, oh, why, does the BB Queue indicate that a certain disc at the very top is available, but never sends that disc?
  3. Netflix lists all the discs it offers in a series, BB does not. I like anime, & most are series. If I search both NF & BB for the same series, both may indicate availability. But only NF will say how many & which discs it offers in that series. I have so often clicked [add series] on BB, only to learn that only disc 3 of a 5 disc series is even offered by BB.
  4. Netflix lists separate titles that are in a series numerically. BB makes me look elsewhere to see which disc is 1st, 2nd, etc.
  5. Netflix has customer reviews for nearly all titles, Blockbuster has very few.
  6. Netflix also offers online viewing. 1 hour /month for every $1 I pay per month. With my broadband internet, I can watch full-screen movies. True, foreign films are only dubbed in English, there are neither subtitles, nor extras, as there might be if I actually had the disc, but there are trade-offs to everything. True, the selection is currently rather small, but give it time.
I do not doubt that Blockbuster will eventually overcome these problems. But because its main business is the store rentals, it is in no hurry to do so. BB even sent me a questionare about it service, & I named a few of these shortcomings. That was 6 months ago, and there is no sign of improvement. I expect that long before BB corrects these flaws, NF will have expanded its selection enough that I will simply drop BB.

BB was content to rent DVDs from its stores; stores that offered very small selections. Dozens of copies of the latest movies, a half-decent selection of classics, some action, Westerns, etc, but if I wanted Plan 9 from Outer Space, I had to buy it. Netflix came along, and offered those obscure titles and the popular ones also. True, you had to wait for the mail, but there was no rush to return before late fees. Once BB realized there was $ to be made online, it tried (feebly) to muscle-in on NF.

Thus, I have >400 titles in my Netflix queue, and only about 90 in my Blockbuster queue. If I make no more additions, I suspect the Netfix queue will reach zero not much later than the BB Q will. I much prefer Netflix, but as mentioned already, BB does offer a few titles that NF currently does not.

I must add that while NF has sent a few discs that stopped playing in the middle of the movies, I have received about 800 discs from NF, and this is a very small percentage of non-working discs. However, lately, I have been able to play most any disc on one or more of my 3 DVD drives. Some scratches are problems for one drive, but not the other. I rarely watch discs on a player, but rather, use a PC or laptop for over 99% of viewing.

I also own a few discs that are brand new, but still will not play on my JVC DVD player, they worked fine on the PC's DVD drive, though. I had contacted the disc manufacturers about these problems, and was told that they checked and found that those titles simply would not work on that player. Having been in Electronics, I know that they simply cannot fix all the bugs without making the products too expensive. However, with borrowed discs, I would think that problems are far more often caused by scratches, than by quirks in the encoding process that just happen to mesh with bugs in the players.

BB has not only sent discs that did not play all the way to the end, but has even send a few broken discs. Not only cracked, but broken clean through from the rim to the hub. Even 1 that was in two pieces. How can they handle these broken discs without realizing that they are broken? Moreover, BB is notorious for sending the wrong disc. Just today, I went to play one that I just received, only to notice that it was not the disc I wanted. Not even the sleeve to the disc I had ordered! This has happened more than a few times even since I reopened my account with BB. However, I must, in fairness add that these broken discs were shipped from BB's Gaithersburg Maryland distribution center.

Nevertheless, as NF makes all its $ in online rentals, it cannot afford and does not tollerate such things as cracked discs. BB only makes a fraction of its $ in online rentals, so it can afford to lose a few customers who are tired of this.

I think some of you are totally missing the point. Netflix's founders found a creative new way of delivering movies to consumers that Blockbuster didn't. That way of doing business is what made Netflix and if they can't protect that then they would not be in business. Same goes for Blockbuster if it were the other way around.

I don't know if Blockbuster was the first to offer videos from stores but they did it best. If that was the core of their business model and an upstart challenged them on it you can bet Blockbuster would have sued. The reason Netflix's model is protected is because it was unique.

If it were not for visionaries that come up with new ways to deliver new or existing services to consumers we'd never have any competition. Sure renting movies is not new but the founders of Netflix were probably frustrated Blockbuster customers that got tired of not being able to ever get the flick they wanted and outrageous fees. They saw that the internet provided them with an opportunity to challenge the big dog.

If Blockbuster had not been sleeping at the wheel they could have seen the future and improved upon their service but they didn't and the rest is history.

I have not been in a Blockbuster in many years now and there is no service that they offer that will change it. The time of brick and mortar video rental stores is coming to an end. Slow, but and end no doubt! So they had better find a new way to deliver their product because Netflix is not who they should be worried about. If Blockbuster wants to remain in business they should have already come up with a plan to deliver via VoD or to partner with ISPs and telecommunications companies like Verizon and Comcast because if they don’t its likely the death of Blockbuster increases every time PCs and internet connections get faster.

netflix didn't really have a choice but try (not that i think its right). blockbuster copied their original service in the first place, and because of blockbusters already well established business as a neighborhood rental service, they were easily able to 1up netflix. netflix needed a way to compete in some other fashion, and not allow blockbuster to easily follow suit, since netflix is unable to match blockbusters combination in mail-at store service.

I think settling was the best thing Netflix could do in this case. I don't see how Netflix really had a chance in court. Blockbuster probably would've argued that the patent was for a business model, but Blockbuster already has a business model, and that online rentals would was just an amendment to their own separate model. I do think that it was pretty "in your face" of Blockbuster to directly compete with Netflix, however. Especially with the commercials that compared the two. And I think Netflix was in the right to pursue them. The only reason that Blockbuster started online rentals is because they saw it was a good idea and followed Netflix. Business model patents are really only a way of companies saying, "This is how we do things. It makes us a lot of money to do things like this. So everyone else back off for a little while." These patents run out after so many years, but Blockbuster wouldn't have been able to survive it. Leeching off of Netflix was the last gasping breath of a dieing corporation. I wouldn't be surprised to see Netflix open up stores pretty soon.

Mr. Wizzy said,
I wouldn't be surprised to see Netflix open up stores pretty soon.

There is no way Netflix can come up with the cash needed to start opening enough stores to challenge Blockbuster. The only way Netflix will survive now is to merge with Hollywood Video. After all, there is no way for Netflix to compete with Blockbuster's Total Access and will slowly lose customers to Blockbuster. A merger or partner with Hollywood video would allow them to offer the in store return and rental and would give Hollywood video an entry point to the popular online rental market.

Stupid Netflix! I never liked them... many of my friends and even grandma was lured to it but I refused. I knew Blockbuster would serve me good, and it does! Maybe it's not perfect (what is?), but it does a good job. I get movies quickly and most of them are in good condition, and their "Total Access" system rocks. Very user friendly.

Netflix's just jealous.

Blockbuster should have just fought the patent dispute. The patent seems to me to be too obvious and a challenege could force it to be invalidated.

M2Ys4U said,
Blockbuster should have just fought the patent dispute. The patent seems to me to be too obvious and a challenege could force it to be invalidated.


I need to stop reading the news, these type of lawsuits just stress me out. Sounds like if i patent the color red when used in a dvd box label i could sue netflix.