» Netflix Suing Blockbuster

Netflix is accusing Blockbuster of Illegally Copying its ideas.

SAN FRANCISCO (AP) -- Online DVD rental service Netflix Inc. on Tuesday accused Blockbuster Inc. of illegally copying its ideas in a patent infringement lawsuit challenging the video store chain's recent Internet expansion.

The complaint, filed in U.S. District Court in San Francisco, focuses largely on the online wish lists that prioritize the DVD desires of about 5.4 million people who subscribe to either Netflix or Blockbuster's Internet service.

That change, introduced by Netflix seven years ago, became so popular that Blockbuster last year stopped charging late fees for tardy rental returns to its video stores. Dallas-based Blockbuster once pocketed hundreds of millions of dollars annually from those late fees.

Blockbuster initially denigrated the flat-fee concept, but then reversed course and launched its Internet service in 2004 after scores of customers defected to Netflix, based in Los Gatos, Calif.

Blockbuster spokesman Randy Hargrove declined to comment Tuesday because the company hadn't yet seen the suit.

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.

For instance, the maker of the popular Blackberry e-mail device last month agreed to pay $612.5 million to settle a long-running patent infringement case.

If Netflix prevails, it could thwart its biggest competitor in the steadily growing field of online DVD rentals.

In contrast, Netflix earned $42 million last year. But its service has been recently fending off a backlash triggered by a class-action lawsuit that focused attention on a scoring system that penalizes its most frequent renters. Netflix is awaiting court approval of a proposed settlement that would give free DVDs for a month to millions of former and current subscribers.

Source: Yahoo!  Finance