Netflix Wants Blockbuster Online Shut

Netflix is attempting to have rival Blockbuster Online shut down by suing Blockbuster in a federal court in Northern California on Tuesday. The company claims its biggest competitor is committing patent infringement and is asking for an injunction to bar Blockbuster from allowing online rentals.

Two patents surrounding online DVD rental are held by Netflix. The first was awarded in 2003 and covers the concept of the automatic queue, which customers add to from the company's library and then receive movies in a customizable order of preference.

The second patent was awarded on the day of the lawsuit, and covers the method that allows Netflix subscribers to keep the DVDs for an unlimited amount of time, and "to obtain new DVDs without incurring additional charges and to prioritize and reprioritize their own personal dynamic queue--of DVDs to be rented," the lawsuit reads.

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Netflix claims that Blockbuster knew of the company's 2003 patent and its work towards the second, yet ignored them with the launch of Blockbuster Online. Netflix added that the action to sue Blockbuster had to be taken in order to protect its business interests.

Blockbuster had no comment as it had not reviewed the lawsuit as of press time. However, its new online component is playing a huge role in the company's future business strategy.

In mid-March, Blockbuster CEO John Antioco said that online rentals would expand to 20 million households by the end of the decade, with in-store revenue falling some 25 percent during that same time period. Thus, Blockbuster's online component has become increasingly important.

Over a quarter-billion dollars has been invested in the service, and sources tell BetaNews that selling Blockbuster Online subscriptions has become the number one priority in the company's stores, even above in-store rentals. Some locations are expected to sell as many as four subscriptions per week or more, with repercussions for stores that underperform.

While that number may not seem like a lot, across Blockbuster's 6,000 plus locations it adds up to about 120,000 new subscribers per month for the service.

Blockbuster Online currently has one million subscribers, a quarter of Netflix's 4.2 million customers.

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