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Last Updated: Wednesday, 5 April 2006, 06:47 GMT 07:47 UK
Netflix sues Blockbuster on DVDs
DVD sent out by online rental firm
The online services all pay the first class postage both ways
US online movie-rental service Netflix has sued Blockbuster, claiming its rival copied its way of doing business. California-based Netflix has two patents protecting its business, which lets subscribers pay a monthly fee and then rent out DVDs via its website.

It wants Blockbuster's similar service halted and the court to award damages.

Blockbuster, the world's largest video rental chain, has seen demand for its store-based business decline as firms like Netflix lure away customers.

Shifting images

Instead of heading to a video shop, clients using a postal service can list a number of films in terms of preference, and then receive them in their mailbox.

Once they have watched a film, they post it back to the company - which then sends out the next movie on the list.

Subscribers can usually keep three movies at a time and, because they pay a subscription, do not get hit with charges such as late fees.

Netflix, founded in 1999, was one of the first companies to offer this service, and has a US patent protecting the way it allows customers to select their films, get them sent out, and then return them for more.

Its second patent covers the way customers can keep the films for as long as they want without being charged extra and how they can rejig their list of preferred films.

Analysts said that it may prove tricky for Netflix, which has close to five million subscribers, to enforce their patents. Blockbuster wants its postal service to reach two million subscribers this year.

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