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Netflix fails to ditch Blockbuster's antitrust case

The complex legal dispute between film rental firms Blockbuster and Netflix has entered new territory as Blockbuster was given permission to pursue an antitrust case against Netflix.23 Aug 2006

Netflix is already pursuing a patent infringement case against Blockbuster and had objected to the antitrust case and to the prospect of the two actions being heard together. The two will proceed together, ruled US District Judge William Alsup.

Netflix sued Blockbuster in April for the alleged infringement of two patents, one of which it had been granted just days earlier. Its case alleged that Blockbuster's internet film rental arm violated patents it holds in systems for operating an online film rental business.

In June, Blockbuster counterclaimed with an antitrust case alleging that Netflix used deceptive practices to obtain its patents and to monopolise the online rental business.

Netflix filed a motion to dismiss Blockbuster's suit, and it is this motion which has just been defeated, meaning not only that the antitrust case will be heard, but that it will be heard in tandem with the patent infringement case.

"As a result of Netflix's purported monopolistic conduct, Blockbuster may be forced out of the market, which would cede to Netflix virtually complete control of the online DVD market," wrote Alsup in his judgment. He also said that Netflix can attempt to have the antitrust case dismissed later in proceedings.

Blockbuster argues that Netflix's patents are unenforceable in its antitrust claims. "There is nothing original about renting movies or subscription rental programs," said Marshall Grossman at the time of the filing of the suit. Grossman works for Alschuler Grossman, Stein & Kahan, the firm representing Blockbuster in the litigation. "Both were widely practiced long before any purported invention by Netflix."

"As for Netflix's so-called 'dynamic' queue, we are convinced it is not legally patentable," said Grossman. "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."

Alsup's judgment is procedural and is not a ruling on the substance of the case, said legal experts following the case. It means only that Blockbuster will be allowed to present evidence that demonstrates antitrust liability, they said.

"We remain intent on aggressively pursuing our antitrust counter-claims," Blockbuster spokesman Randy Hargrove told news agency Reuters.

Netfix spokesman Steve Swasey told the agency that the firm would "continue to defend our patents and business methods."

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