We can all agree that 2020 was a challenging year, and much of the difficulties remain in 2021. In the UK, we observed a rapid shift among consumers from shopping and socialising on the high street to working, exercising, shopping and socialising online. Once the banana bread had been baked and the yoga classes were complete, many of us fell onto our sofas or beds to watch television. So, it is unsurprising that one of the success stories of last year was a company that helped many of us get through 2020: the streaming platform giant Netflix. Netflix's stock price almost doubled last year, 16 million new subscribers were added in the first three months of 2020, and its yearly revenue exceeded $21 billion in 2019. Many of us are familiar with binge-watching TV series on Netflix, but few of us are familiar with Netflix's vast intellectual property (IP) portfolio. We take a look at Netflix's IP story in this article, which contains as many twists and turns as one of its original dramas.
Netflix is a US-based company which was founded in 1997. Those of you old enough to remember the days before streaming and widespread home internet may also remember going to a (bricks-and-mortar) video rental shop to rent video cassettes and DVDs to watch at home. This required you to leave the comfort of your own home to browse the offerings of the shop and hope that the film you wanted to watch had not already been rented out by someone else. Netflix's initial business model was based around renting DVDs via the internet and postal mail. Netflix launched an online DVD-rental store, which operated using similar principles to that of the physical video rental shops, but removed the requirement to leave your home! Initially, Netflix operated in the US only but by the early 2000s had expanded into other territories, and their patent portfolio reflects this.
One of the first patent applications Netflix filed was therefore, unsurprisingly, for a method and apparatus for renting items (US6584450) using a computer. This early patent concerns a technique that allows customers to specify what items they want to rent, limiting the number of items that can be rented at any one time, and delivering items in a customer's rental queue based on the return of previously delivered items from the customer.
Netflix pivoted in the early 2000s to make use of technologies that enabled customers to stream content from the internet. Thus, Netflix launched its video on demand service in 2007, and began to move away from the original DVD rental service. It is unsurprising that Netflix started to file patent applications for this new part of their business. An early example of this is WO2009/082579 which relates to trick play modes for streaming programmes that enable simulated fast forward and rewind motion without requiring a processor to download, buffer and display all parts of the programme that are being forwarded/rewound.
Netflix's patent portfolio contains hundreds of patent applications and granted patents, filed over many years and reflecting the changing direction of, or problems encountered by, the business. One of the problems Netflix faces now is how to retain its subscribers.
In our view, patents that improve user experience are particularly interesting because they may help explain the science behind Netflix addiction. If you binged watched The Queen's Gambit (or any other series for that matter), we bet that you skipped the closing credits or the recaps of previous episodes. The technology behind "the skip" is disclosed WO2019018164. Briefly, according to this patent application, "the skip" works such that "a sequence analyzer parses previous episodes of the serial and selects a representative frame for each shot sequence. The sequence analyzer then generates a fingerprint for each shot sequence based on the associated representative frame and compares fingerprints associated with a current episode of the serial to fingerprints associated with one or more previous episodes of the serial to identify shot sequences that have already been played. The user may then skip those repeated sequences via a playback interface." This technology literally enables binge-watching!
After you binge-watched The Queen's Gambit, you are now most likely on the prowl for another binge-worthy series. You go back to your Netflix homepage and see a few rows of recommended movies and TV-series which instantly catch your eye. Have you ever wondered how these titles are selected? EP3152723 explains how: this application discloses techniques for selecting and ordering groups of titles in rows to present as recommendations, which are based on your personalised rankings.
Netflix's recommendations seem to always be (well, most of the time) quite accurate. How do they do it? Is it magic? No, it is a multitude of very advanced artificial intelligence (AI) algorithms. One of the sophisticated AI algorithms for recommending content to a user is disclosed in US2020143448. Every movie you pick, every like or dislike you give, teaches the Netflix algorithm. In return, the Netflix algorithm provides you with the best match of your next binge-worthy series. However, it gets even more sophisticated because Netflix can guess your current mood and adjust the selection of movies and series based on your mood. This is described in WO2012138667, a patent application that dates back ten years, indicating that Netflix has been interested in learning patterns of behaviour and recommending content for a long time.
Now, you do not have to blame yourself for spending entire days binge-watching Netflix. As you can see, it is very difficult not to!
It is clear from the most recently filed patent applications that Netflix is thinking about their global customer base and accessibility issues. For example, there are patent applications directed to generating subtitles for trailers, to techniques for automatically translating any string of text in a user interface (e.g. buttons and menus) into another language, and translating subtitles.
Trade marks & registered designs
Netflix also pays attention to other forms of intellectual property like trade marks and registered designs. For example, Netflix has trade marked its logo and the word "NETFLIX" in Europe. Moreover, Netflix obtained several other figurative trade marks such as "Netflix 3D" and Netflix Super HD". The corresponding trade mark registrations may be found in the US and other jurisdictions in which they operate.
Netflix also owns several registered designs which mainly protect various parts of their proprietary Graphical User Interface (GUI). For instance, USD892851 protects "display screen or portion thereof with animated graphical user interface". You most certainly have seen this GUI if you use Netflix on your mobile device.
Netflix does not just distribute content but also produces original programming (indicated on the platform as "Netflix Original" content). This began in 2011 when Netflix commissioned the new US drama House of Cards, and the company has since signed exclusive deals with authors, creators, studios and production companies for content to be released via its platform. Netflix also continues to license content from other distributers. Thus, copyright forms a large part of Netflix's IP portfolio.
The morals of the Netflix story?
Netflix's success is underpinned by technology, which it continues to develop, and by a strong IP portfolio. We think there are some points in the Netflix story that are particularly relevant to technology start-ups and scale-ups:
- Make sure IP is always on your to-do list! If you're innovating, always think about protecting that innovation. If you're a start-up or scale-up, your IP portfolio won't be the size of that of Netflix, but ideally it should grow as you continue to grow your innovation team.
- Keep an eye on the market and adapt with change. Companies sometimes continue to develop and pursue technologies that the market has rejected or which has been made redundant by other developments. (Remember Blockbuster?!) Netflix pivoted from DVD rentals to streaming after seeing how popular YouTube was becoming, and they started protecting this new part of their business too.
- Identify your markets, which may change over time, and budget accordingly. Netflix started their DVD business in the US, and then rolled-out to other countries. Their patent portfolio follows their business plan, as they have obtained patents in many (but not all) of the markets in which they operate. As a start-up or scale-up, we can help you to develop a patent filing strategy to suit your budget and your key markets, and outline ways to save or delay costs.
- Ensure you have a five-year plan, a plan for growth and/or an exit strategy. Your IP portfolio should suit and support your business plans. For example, some founders know from the outset that they want their business to be acquired by a larger one within a few years. In this case, the IP portfolio (including know how and trade secrets) will form part of the acquirable assets and therefore, add value, so it is important to start building one early on. In another example, some companies may realise they need to license their technology to others in order to generate revenue. This is made easier if the technology has been protected using IP, and IP rights can help you to negotiate with third parties. We can help develop an IP strategy that suits your commercial goals.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.