says they've received a U.S. patent covering the subscription-based online DVD rental service, but they haven't yet decided what to do regarding rival such services.
"Our team has focused their efforts on innovation to better serve our customers and on enhancing our intellectual property," said Netflix general counsel David Hyman in a formal statement. "We're gratified that the Patent Office has recognized what a leap forward the Netflix subscription service is. However, we know that great companies are built by providing an outstanding consumer experience, and that is our primary focus."
Netflix stock rose as high as 11.5 percent in early June 24 trading, according to Forbes, who said analysts think the jump was due to "eased investor concerns" about Netflix's "sustainability" in light of the patent. "This would give everybody the impression that there's ... some level of protection of future cash flows to the company," Delafield Hambrecht analyst R.J. Jones, who put a "hold" rating on Netflix stock, told Forbes, who has a "hold" rating on Netflix stock. "For the near term, this provides a way for them to defend against competition."
Jones also told the magazine he thinks Netflix will take "some action" against competitors, either by seeking royalties, pursuing licensing deals, or suing them out of the business. But he added that likely defenses would be "the obviousness of the process." Jones also told Forbes Netflix, if it does choose the legal action route, could well enough chase the smaller rivals before going after big ones like Wal-Mart or Blockbuster.
Earlier this year, a Newport Beach company, Acacia Media Research Corp., launched action against several adult Internet companies over its claim to patents for streaming media technology Acacia calls Digital Media Technology, with a few companies agreeing to licensing deals with Acacia but others fighting back in pending court cases.
But another NetFlix spokesperson told Forbes the company's made no decisions yet, even regarding whether to pursue competitors like Wal-Mart or Blockbuster. "We have not decided on what the next step is," Netflix spokeswoman Lynn Brinton told Forbes. "We are focused simply on executing in the market place, where we feel the battle for market leadership is going to be won."
