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Blockbuster escalates row over online rental patent

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Netflix used deceptive practices to obtain patents and monopolise the online rental business, Blockbuster claimed this week. Netflix is suing Blockbuster for alleged infringement of its business method patent.

Blockbuster, which says the Netflix patents are unenforceable, filed anti-trust counterclaims in a federal court in San Francisco.

"There is nothing original about renting movies or subscription rental programs," said Marshall Grossman, of Alschuler Grossman, Stein & Kahan, the firm representing Blockbuster in the litigation. "Both were widely practiced long before any purported invention by Netflix."

Grossman said Netflix claiming exclusive rights over subscription movie rentals "is like a fast-food restaurant trying to patent selling hamburgers through a drive-through window".

"As for Netflix's so-called 'dynamic' queue, we are convinced it is not legally patentable," he added. "We think it is obvious that if you are going to provide subscription rentals over the internet, you have to let your customers list the items they want to receive and enable them to periodically update their lists."

The claims filed by Blockbuster against Netflix also allege that Netflix failed to inform the Patent Office of previous patents and previous business methods of other companies, despite the legal duty to make these disclosures.

According to Blockbuster, Netflix has admitted that it was aware of the prior patents of another company, which had already put Netflix on notice about possible patent infringement. Blockbuster says Netflix failed to disclose those prior patents to the Patent Office.

"The court has the final say on whether a patent is valid and whether a company was honest in pursuing its patent," Grossman said. "We state in our counterclaims that Netflix's conduct at the Patent Office was deliberately deceptive and that Netflix's goal all along has been to ultimately monopolise the online rental business."

Blockbuster also points out that Netflix appears to have singled out Blockbuster and no other online service for litigation, waited nearly three years after receiving its first patent and 19 months since the launch of Blockbuster Online before filing the action.

"We believe consumers are best served when companies compete in the marketplace instead of in the courtroom," Blockbuster chairman and CEO John Antioco said. "However, since Netflix has filed what we believe is a needless lawsuit, we will aggressively defend ourselves and vigorously pursue our counterclaims."

See also: Netflix sues Blockbuster over business method patents, OUT-LAW News, 05/04/2006

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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