Netflix vs Blockbuster

Wow, I just saw this news item that Netflix has sued Blockbuster and is demanding that Blockbuster shuts down its online DVD rental service.

Wedbush Morgan analyst Michael Pachter, who also is an attorney, said it was unclear whether Netflix’s challenge to Blockbuster’s online service would be upheld by the federal court.

“It’s my opinion that it won’t be,” Pachter said. “Blockbuster detrimentally relied on their silence as consent. If in fact (Netflix) feels so damaged they should have sought injunctive relief before Blockbuster rolled out its service.” [Reuters]

I am not sure I agree, nor do I claim to know what has been the level of correspondence between the two companies.

All I can say is that, indeed, Reed Hastings innovated fundamentally on the DVD rental category, and deserves some credit / protection for that. I am also happy to see that he did file process patents in the first place, and that two of those have now been granted.

Venture Capitalists always tend to ask whether the IP in a company is defensible. What we are seeing these days is that some of those startups have survived and blossomed, and are in positions to defend their IP. Furthermore, they now have the wherewithal to benefit from their innovation.

Don’t you think this is good news?