Netflix Patents Do Not Pose Barriers to Entry

Envision IP reviews Netflix’s US patent portfolio to determine if their IP poses barriers to entry for competitors.

netflix

Maulin V. Shah

November 9, 2012

During an interview today on CNBC’s Fast Money, Carl Icahn called Netflix “a great platform” and noted the high barriers to entry for potential competitors, such as Amazon.  Icahn also stated “‘[Netflix] would be the mother of all auctions if it ever went to auction”, suggesting that an auction of the company may be possible in the future.

Envision IP reviewed the US patent portfolio of Netflix to understand if the company’s intellectual property might serve as a barrier to entry to potential competitors.

Netflix owns 14 US patents covering the following aspects of its on-demand and DVD-by-mail business:

-Analyzing user ratings (4)

-DVD mailing envelopes (4)

-Rental system administration (3)

-Methods for managing rental workflow across distributed locations (2)

-Activating streaming video via a blu-ray disc player (1)

The company’s US patent portfolio primarily protects aspects of its DVD-by-mail business, with only a single US patent with claims related to video streaming.

However, Netflix owns 32 pending US patent applications that cover technologies to improve and optimize on-demand streaming video delivery, such as data synchronization, encoding, adaptive streaming, and multiplexing.  Its pending patent applications suggest that Netflix’s current R&D focus is in-line with its business shift towards on-demand streaming video.

That being said, it does not appear that competitors or new entrants to the on-demand streaming video market would face significant patent barriers from Netflix, as the company’s US patents are heavily focused on its traditional DVD-by-mail business.

It is worth noting that Amazon owns 22 US patents with claims related to multimedia streaming, while Blockbuster owns 3 US patents with claims related to the same.