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Netflix sews up rental patent

The online DVD rental company is awarded a business patent that encompasses its entire process for renting out movies, a win that could put a speed bump in rival Wal-Mart's path.

Netflix has been granted a wide-ranging patent encompassing its online DVD rental service, a win that could pose a legal speed bump to Wal-Mart's entry into the business.

The patent, granted by the U.S. Patent & Trademark Office, covers Netflix's entire process of renting out movies and extends to music, video games and books, the Los Gatos, Calif.-based company announced Tuesday.

Netflix charges a monthly subscription fee for people to rent a specified number of movies on DVD. Subscribers choose their titles on the rental Web site, then Netflix mails the films to them. People can keep a limited number of DVDs for the length of the subscription or swap them for new titles.

The patent grant comes at a critical juncture for Netflix. Though its more than 1 million subscribers means it commands more than 90 percent of the online rental market, according to the company, rivals such as Wal-Mart and Blockbuster are circling.

Earlier this month, Wal-Mart introduced its own online movie rental service that's priced a notch lower than Netflix's. The retail giant charges $15.54 a month to rent two movies at a time, $18.76 to rent three and $21.94 to rent four at a time. Netflix charges $19.95 a month for three movies at a time.

Netflix spokeswoman Lynn Brinton pointed out the resemblance between the Bentonville, Ark-based company's DVD rental process and Netflix's own. "You can't look at (the Wal-Mart service) and not see there's a lot of similarities," she said.

However, Brinton would not say whether the patent grant foreshadows a lawsuit against Wal-Mart.

Nonetheless, having the U.S. Patent & Trademark Office on its side could be a powerful weapon for Netflix in a courtroom dispute, according to legal analysts.

"Issued patents are presumed valid until proven otherwise by clear and convincing evidence," said Alan Fisch, an intellectual-property lawyer and partner at Howrey Simon Arnold & White in Washington.