NetFlix 2009 Annual Report Download - page 72

NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In January through April of 2009, a number of purported anti-trust class action suits were filed against the
Company. Wal-Mart Stores, Inc. and Walmart.com USA LLC (collectively, Wal-Mart) were also named as
defendants in these suits. Most of the suits were filed in the United States District Court for the Northern District
of California and other federal district courts around the country. A number of suits were filed in the Superior
Court of the State of California, Santa Clara County. The plaintiffs, who are current or former Netflix customers,
generally allege that Netflix and Wal-Mart entered into an agreement to divide the markets for sales and online
rentals of DVDs in the United States, which resulted in higher Netflix subscription prices. The complaints, which
assert violation of federal and/or state antitrust laws, seek injunctive relief, costs (including attorneys’ fees) and
damages in an unspecified amount. On April 10, 2009, the Judicial Panel on Multidistrict Litigation ordered all
cases pending in federal court transferred to the Northern District of California to be consolidated or coordinated
for pre-trial purposes. These cases have been assigned the multidistrict litigation number MDL-2029. The cases
pending in the Superior Court of the State of California, Santa Clara County have been consolidated. In addition,
in May of 2009, three additional lawsuits were filed—two in the Northern District of California and one in the
Superior Court of the State of California, San Mateo County—alleging identical conduct and seeking identical
relief. In these three cases, the plaintiffs are current or former subscribers to the online DVD rental service
offered by Blockbuster Inc. The two cases filed in federal court on behalf of Blockbuster subscribers have been
related to MDL-2029. On December 1, 2009, the federal Court entered an order granting defendants’ motion to
dismiss the two federal cases filed on behalf of Blockbuster subscribers. Plaintiffs have until March 1, 2010 to
file an amended complaint. The lawsuit filed in Superior Court of the State of California, San Mateo County has
been coordinated with the cases pending in Santa Clara County.
On December 26, 2008, Quito Enterprises, LLC filed a complaint for patent infringement against the
Company in the United States District Court for the Southern District of Florida, captioned Quito Enterprises,
LLC v. Netflix, Inc., et. al, Civil Action No. 1:08-cv-23543-AJ. The complaint alleges that the Company
infringed U.S. Patent No. 5,890,152 entitled “Personal Feedback Browser for Obtaining Media Files” issued on
March 30, 1999. The complaint seeks unspecified damages, interest, and seeks to permanently enjoin the
Company from infringing the patent in the future. On September 30, 2009, the Company filed a motion for
summary judgment of invalidity. The Court has not set a hearing date for the motion.
On October 24, 2008, Media Queue, LLC filed a complaint for patent infringement against the Company in
the United States District Court for the Eastern District of Oklahoma, captioned Media Queue, LLC v. Netflix,
Inc., et. al , Civil Action No. CIV 08-402-KEW. The complaint alleges that the Company infringed U.S. Patent
No. 7,389,243 entitled “Notification System and Method for Media Queue” issued on June 17, 2008. The
complaint seeks unspecified compensatory and enhanced damages, interest and fees, and seeks to permanently
enjoin the Company from infringing the patent in the future. On February 24, 2009, the case was transferred to
the Northern District of California. On August 14, 2009, the Company filed a motion for summary judgment of
non-infringement. A hearing on the motion was held on November 17, 2009. On December 1, 2009, the Court
granted the Company’s motion for summary judgment of non-infringement. On February 10, 2009, plaintiff
appealed the summary judgement ruling.
On December 28, 2007, Parallel Networks, LLC filed a complaint for patent infringement against the
Company in the United States District Court for the Eastern District of Texas, captioned Parallel Networks, LLC
v. Netflix, Inc., et. al , Civil Action No 2:07-cv-562-LED. The complaint alleges that the Company infringed U.S.
Patent Nos. 5,894,554 and 6,415,335 B1 entitled “System For Managing Dynamic Web Page Generation
Requests by Intercepting Request at Web Server and Routing to Page Server Thereby Releasing Web Server to
Process Other Requests” and “System and Method for Managing Dynamic Web Page Generation Requests”,
issued on April 13, 1999 and July 2, 2002, respectively. The complaint seeks unspecified compensatory and
enhanced damages, interest and fees, and seeks to permanently enjoin the Company from infringing the patent in
the future.
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