A federal judge in San Francisco on Tuesday allowed video rental giant Blockbuster Inc to go forward with anti-trust claims against online rival Netflix Inc, which has sued Blockbuster for alleged patent violations.

Netflix had asked the court to dismiss Blockbuster's counter-suit, to split the two lawsuits into separate proceedings, and to postpone discovery on the anti-trust lawsuit until its patent claims are resolved.

In a written ruling, U.S. District Judge William Alsup rejected all three motions, saying Blockbuster adequately pled its antitrust counterclaims and that Netflix did not show it would be harmed by allowing both sets of claims to proceed together.

As a result of Netflix's purported monopolistic conduct, Blockbuster may be forced out of the market, which would cede to Netflix virtually complete control of the online-DVD market, Alsup wrote.

Alsup said, however, that Netflix can again try to dismiss the antitrust lawsuit at a later point in the proceedings.

Blockbuster spokesman Randy Hargrove said the company was pleased with today's ruling and we remain intent on aggressively pursuing our antitrust counter-claims.

Netflix spokesman Steve Swasey said the company would continue to defend our patents and business methods.

In April, Netflix sued Blockbuster in a bid to shut down two-year-old Blockbuster Online, saying it knowingly infringed on two Netflix patents.

But Blockbuster said the lawsuit is based on unenforceable patents that Netflix obtained deceptively, in a bid to monopolize online rentals.

Patent attorney Victor de Gyarfas of law firm Foley & Lardner, who is following the cases, said Tuesday's court order was a fairly run-of-the-mill thing in patent cases.

The court is merely deciding that Blockbuster may be able to prove facts that give rise to anti-trust liability, de Gyarfas said. The court is not making a determination on the merits (of the case).

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