film and game classification, franchising, licensing, zoning, land use, construction, second-hand dealer,
environmental, health and safety, minimum wage and other labor and employment regulations. Some foreign
countries have copyright and other intellectual property laws that differ from the laws of the United States. These
laws may prevent or limit certain types of business activity in the affected markets.
Similar to the United States, some foreign countries have franchise registration and disclosure laws affecting
the offer and sale of franchises within their borders and to their citizens. They are often not as extensive and
onerous as U.S. laws and regulations. However, as in the United States, failure to comply with such laws could
limit or preclude our ability to expand in those countries through franchising or could affect the enforceability of
franchise agreements.
Compliance with any of the domestic or international regulations discussed above is costly and timeconsuming, and we may encounter difficulties, delays or significant costs in connection with such compliance.
Historical Information
Our business and operations were previously conducted by Blockbuster Entertainment Corporation, which
was incorporated in Delaware in 1982 and entered the movie rental business in 1985. Blockbuster Inc., formerly
an indirect subsidiary of Viacom Inc. (“Viacom”), was incorporated under a different name on October 16, 1989
in Delaware. On September 29, 1994, Blockbuster Entertainment Corporation was merged with and into Viacom.
Subsequent to the merger, our business and operations were conducted by various indirect subsidiaries of
Viacom. Over the year and a half prior to our initial public offering in August 1999, our business and operations
were either (1) merged into Blockbuster Inc. or (2) purchased by Blockbuster Inc. and/or one of its subsidiaries.
In October 2004, Blockbuster Inc. split off from Viacom and became a fully independent company.
Intellectual Property
Trademarks. We own various existing trademark registrations and have trademark applications pending
registration with respect to our services and products offered worldwide. These include BLOCKBUSTER®,
BLOCKBUSTER VIDEO®, TORN TICKET Logos, blockbuster.com®, BLOCKBUSTER Total Access™ word
mark and logo, BLOCKBUSTER GiftCard/s®, BLOCKBUSTER Game Pass® and BLOCKBUSTER Movie
Pass® word marks and logos, BLOCKBUSTER Night®, BLOCKBUSTER Online®, BLOCKBUSTER Rewards®
word mark and logo, MAKE IT A BLOCKBUSTER NIGHT®, and the related BLOCKBUSTER Family of
Marks, GAME RUSH® word mark and logo, MyQ Logo®, MyQ At A Glance Logo®, MOVIE STORE AT
YOUR DOOR®, ONLINE RENTING WITHOUT THE WAIT™, RENTING IS BETTER THAN EVER®, THE
GIFT OF ENTERTAINMENT®, QUIK DROP®, MOVIECLIQUE™, MOVIELINK® word mark and logo, and
XTRA-VISION®, among others, and trade dress elements including, but not limited to, the blue and yellow
awning outside our stores. In addition, we own the domain name registration for “blockbuster.com” and the
related BLOCKBUSTER “Family of Domain Names” for top level and country domain names, plus a wide
variety of other domain name registrations worldwide. We consider our intellectual property rights to be among
our most valuable assets.
Copyrights. In addition to our own intellectual property rights, the scope of the rights of those who own
copyrights in the products we rent also are of importance to us. The copyright “first sale” doctrine provides that, in
the United States, the owner of a legitimate copy of a copyrighted work may, without the consent of the copyright
owner, sell, rent or otherwise transfer possession of that copy. The first sale doctrine does not apply to sound
recordings or computer software (other than software made for a limited purpose computer, such as a video game
platform) for which the U.S. Copyright Act vests the right to control the rental of the copy in the copyright holder.
The first sale doctrine does not exist in most countries outside of the United States where the copyright owner
retains the rental rights to a copyrighted work. In these countries, home video retailers must obtain the right to rent
videos to consumers through a licensing arrangement or a “purchase-with-the-right-to-rent” arrangement. Studios
may charge these home video retailers more for product purchased for rental than product purchased solely for
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