Netflix Challenges Blockbuster over Online Rentals Online DVD rental services that deliver movies by mail are growing quickly, with more than 5 million subscribers nationwide. Now the company that pioneered the business, Netflix, is accusing Blockbuster of trying to copy its patented Internet business model.
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Netflix Challenges Blockbuster over Online Rentals

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Netflix Challenges Blockbuster over Online Rentals

Netflix Challenges Blockbuster over Online Rentals

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RENEE MONTAGNE, Host:

NPR's Scott Horsley reports.

SCOTT HORSLEY: Netflix spokesman Steve Swayze says Blockbuster duplicated key features of that service when it launched its own online offering 19 months ago.

STEVE SWAYZE: If you think back five or six to seven years ago, there was no other way to rent movies other than going to the video store, before Netflix. So Netflix patented its business methods. And we believe that Blockbuster has deliberately and willfully copied them from top to bottom.

HORSLEY: Blockbuster says a lawsuit filed by Netflix last week has no merit. Blockbuster has signed up more than a million subscribers for its online service, and while Netflix has three and a half times that many members, Blockbuster spokeswoman Karen Rascoff(ph) says its rival is running scared.

KAREN RASCOFF: Blockbuster online has emerged as a real competitive force in the online rental industry. And it would appear that Netflix would prefer to take us on in the courts rather than facing us in the marketplace where the consumer is the judge.

HORSLEY: Patent attorney Ben Borson says the challenge for the patent system is to reward pioneers while still allowing followers to make their own improvements. With inventions, as with movies, sometimes the remake is better than the original.

BEN BORSON: You want to always strike a balance. I mean, you would like to have new industries come up. However, if there is too much power concentrated in the hands of one entity, then they will tend to stifle further development.

HORSLEY: Harvard Business School Professor Josh Lerner says over the last two decades the legal system has tilted too far in favor of patent holders, while the office that fields patent applications is now too swamped to do a thorough review.

JOSH LERNER: We've simultaneously made patents much more powerful while making them easier to get.

HORSLEY: The U.S. Patent Office issued more than twice as many patents in fiscal year 2005 as it did two decades ago.

LERNER: And the people who are really being hurt by this are the true innovators. Whether they're the corporations with really the creative, large research departments, or the individual inventers who have that flash of genius while working in their garage. And it becomes much harder for true innovators to get the kind of rewards that they deserve for their invention.

HORSLEY: Scott Horsley, NPR News.

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