If you’re wondering why Netflix waited until 18 months after Blockbuster started up its own online DVD rental business to file suit, it’s because Netflix was only just awarded a key patent for its business model. Netflix’s claims are based on Blockbuster infringing on Netflix’s patent; it’s asking a California federal judge to shutter Blockbuster’s online rental service and award Netflix damages for infringement.
In 2003, Netflix was awarded a patent on the method by which Netflix customers select and receive a a particular number of rental titles, and return them for different selections.
Since launching its online rental service in August 2004, Blockbuster has shoveled more than $300 million into developing its business, with a almost maniacal determination to do in upstart Netflix. But far from going under, Netflix has thrived under the heavyweight’s competition (growing its subscriber base to 4.2 million, compared to the 1 million users Blockbuster has managed to sign up) and Blockbuster has been forced to roll back its marketing due to significant company debts of more than $1 billion.