• Forbes/AP, Thursday, June 28, 2007 10:18 AM

At the request of both parties, San Francisco U.S. District Judge William Alsup has dismissed a 14-month-old patent infringement lawsuit that online DVD rental service Netflix brought against rival Blockbuster. Terms of the settlement were kept confidential; Alsup refused to oversee the settlement because the parties refused to provide him with a copy of the agreement.

Netflix's lawsuit alleged Blockbuster had illegally copied its ideas when it diversified beyond its video stores and began renting DVDs through the Internet in 2004. Specifically, Netflix contended it held two patents covering its automated techniques for managing its customers DVD wish lists, as well as the concept of charging a flat monthly fee for the rentals.

The secrecy surrounding the settlement raises the possibility that the two rivals had reached a "sweetheart agreement" that may stifle competition, says Scott Kamber, a New York lawyer who has filed a separate lawsuit alleging Netflix abused the patent process in an attempt to monopolize the market for online DVD rentals.

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