No olive branch for Napster

The lapsed deadline opens the door for potentially uncomfortable scrutiny of the music industry's licensing practices even as it sets in motion once again legal proceedings that could result in billions of dollars of damages against the pioneering file-swapping service.

The day before granting the legal stay in January, Judge Marilyn Hall Patel said she was planning to allow an investigation into how the labels have accounted for ownership of the songs they say have been stolen through Napster. Patel also said she would open an investigation into the issue of copyright misuse, or whether the labels have abused their control of music copyrights.

Patel will now likely move ahead with those orders as she looks at whether the labels should be granted summary judgment or a win in the case without going to a full trial. No date has been set for the release of those orders or for going to a full trial.

The lack of a settlement spells trouble for a quick launch of Napster's planned music-subscription service, which was delayed late last year to wait for agreements with the music labels.

After more than two years of bitter legal battles, the labels asked a federal court last month for a monthlong time-out to concentrate on a settlement with the once-controversial start-up. Both sides said at the time they were close to finding common ground.

But that legal "stay" expired Sunday without the two sides reaching agreement. Both sides said Tuesday that the litigation would continue without a renewal of the time-out period.

"Given the current state of settlement negotiations, it didn't make sense for the record companies to agree to Napster's request to keep the litigation on hold," said Recording Industry Association of America General Counsel Cary Sherman.

Napster said it hadn't asked the courts for an extension, but that it did plan to continue settlement talks.

"Napster is continuing our settlement and licensing discussions with the major labels and we remain confident that agreements can be reached in the near term," Napster Chief Executive Konrad Hilbers said in a statement.

A representative of the RIAA, the trade group spearheading the lawsuit on behalf of the music labels, could not immediately be reached.

Napster has been negotiating with each of the Big Five record labels, hoping both for an end to the lawsuit, which closed its original file-swapping service, and for the rights to distribute major-label content through its new subscription service.

That's no small goal, even for companies not facing a lawsuit potentially worth billions of dollars. No other music start-up has been able to win licenses from all five of the major labels. Hilbers has said that he would consider launching without all five, but has said he expects to settle with all of them.