June 26 (Bloomberg) -- Netflix Inc., the largest U.S. mail- order movie-rental service, settled claims that Blockbuster Inc. illegally copied its method of letting customers order videos over the Internet.

The two companies ``agreed to a mutually acceptable resolution'' of a lawsuit filed in San Francisco federal court in April 2006, according to court filings today. Terms of the agreement are confidential, said Netflix spokesman Steve Swasey.

Netflix accused Blockbuster, the world's largest retail video-rental chain, of using its patents to launch a rival online service in 2004. Blockbuster countered that Netflix claimed patent rights over methods it didn't invent and accused Netflix of trying to monopolize Web-based movie rentals.

Randy Hargrove, a spokesman for Dallas-based Blockbuster, confirmed a settlement had been reached. He wouldn't comment further.

In August, a federal judge denied Los Gatos, California- based Netflix's request to dismiss Blockbuster's antitrust and patent claims.

Blockbuster, seeking to win customers from Netflix, introduced an online-movie rental plan on June 12 that's cheaper than its rival's.

Profits at both companies fell after they lowered prices and introduced services to attract consumers who rent movies online. Netflix began a new video-download service this year while Blockbuster expanded an existing plan that allows customers to trade Internet rentals for new films at a store.

The case is Netflix Inc. v Blockbuster Inc., 06-2361, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

Last Updated: June 26, 2007 21:48 EDT