The ruling from the 9th Circuit Court of Appeals in San Francisco stays a week-old decision ordering the company to block all song trading through its service, unless it could block 100 percent of the songs that record labels had identified as copyrighted.
Napster, which is appealing last week's order, had said it could block more than 99 percent of unauthorized songs on its service with new audio fingerprint technology it is testing but could not guarantee 100 percent success.
The appeals court released a terse note Wednesday saying that last week's ruling, made by federal Judge Marilyn Hall Patel, would be "stayed pending a further order of this court."
That doesn't mean the service will return to its old free-swapping ways, however. Napster is still living under the terms of an original court order that requires it to block songs. The latest version of the software, which everyone on the service now must use, blocks far more songs than the ones identified by the record companies.
Napster would not comment on whether it immediately planned to restart its now-closed service.
"We're studying the implications of the decision," Napster General Counsel Jonathan Schwartz said. "We continue to push ahead with the launch of our new membership service later this summer."
The Recording Industry Association of America said it expected the injunction to be back in place as soon as the appeals court had reviewed all the facts.
"The evidence in this case clearly shows that Napster has not done all it can do to police its system," Cary Sherman, the RIAA's general counsel, said in a statement. "The 9th Circuit Court has previously ruled that Napster's conduct required an injunction, and we expect them to do so again after a full review of the facts."
Wednesday's appeals court order highlights the consistent, if slight, disconnect between the way the lower courts and appeals judges have treated Napster.
Patel originally ordered the company shut down in July 2000, but her order was almost immediately stayed by the appeals court.
After reviewing the evidence, the higher court ruled that Patel had been right to order an injunction against Napster, forcing it to block copyrighted works. But the appeals judges stopped short of Patel's order, giving the file-swapping company some wiggle room.
"We recognize that this is not an exact science," the panel of appeals judges wrote, adding that Napster did have a responsibility to police its service for copyrighted works "within the limits of the system."
It is that slight caveat that will likely be highlighted as Napster and the recording industry debate whether Patel's 100 percent figure is too stringent a standard. Napster has already modified its system to support a new kind of file-filtering technology that examines individual audio characteristics of songs to identify them.
The result of Napster's modifications has been to drive most of its consumers, and most of the available files, away from the service.
The company conceded that a few of the identified songs were still slipping through the service before it voluntarily shut itself down for "database upgrades" on July 1. Still, only about 100,000 to 150,000 people were still using the service, sharing an average of just 2.5 songs, according to analysis company Webnoize.
A quick look at the service, which still displays how many people are online, showed that about 114,000 people were online Wednesday afternoon, sharing about 58,000 files total--although none of these could be downloaded.
By contrast, Napster alternatives such as Music City have begun drawing as many as 400,000 consumers at a time, with no filtering on their services.
The appeals court has already set a schedule for the full appeal of Patel's order. Napster will be the first to respond, with legal briefs due Aug. 9.