Blockbuster to Fight Netflix Lawsuit

Blockbuster Inc. (BBI) said Thursday it would defend itself vigorously in a lawsuit brought by online rival Netflix Inc. (NFLX) which accuses the No. 1 video rental chain of violating two patents.

In a securities filing, Blockbuster described the Netflix lawsuit, filed Tuesday in federal court in Northern California, as "without merit."

The lawsuit accuses Blockbuster's online service of infringing on patents that protect Netflix's business method of allowing subscribers to prioritize their choices of movie titles in a "dynamic queue" and of sending DVDs to subscribers in the order of titles in the queue.

The patents were issued in 2003 and on Tuesday.

In a press release, Blockbuster Online general manager Shane Evangelist said the Netflix lawsuit "is an attempt ... to stifle competition and, as a result, reduce consumer choice."

Blockbuster said Netflix "appears to have singled out Blockbuster and no other online competitor for litigation, waiting nearly three years after receiving its first patent and 19 months since the launch of Blockbuster Online before filing the action."

Blockbuster spokeswoman Karen Raskopf said Blockbuster examined the Netflix patent prior to launching its online service in August 2004. "Netflix has not called to complain or sent us a letter on this issue," Raskopf said Thursday.

A Netflix spokesman could not immediately be reached for comment.

Raskopf disputed that Netflix introduced the concepts of subscription movies or ordering merchandise over the Internet, and said it was "common practice" for online movie and game rental service to have a queue.

She also said Netflix appeared to be selectively enforcing its patent claims, ignoring other Internet-based rental companies, including DVD Avenue, QwikFlix, eHit and Gamefly.