We remain confident that agreements can be reached in the near term

Konrad Hilbers, Napster

Last month, US district judge Marilyn Hall Patel agreed to a 30-day delay in the lawsuit brought by major record labels, including EMI and Sony.

The companies have accused Napster of violating copyright laws by facilitating the unlicensed exchange of music files - also known as mp3 files - over the internet.

Shut down

The recording industry is seeking a ruling that finds Napster liable for copyright infringement, and it wants damages.

MusicNet is backed by big labels

Napster, which at its height had more than 25 million users, has now effectively shut down and is hoping to re-launch itself as a legitimate music service.

Since it shut down, legitimate services such as Pressplay and MusicNet, backed by the major labels, have launched with copyright deals in place.

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

Terms of settlement negotiations have not disclosed, but Reuters new agency reports insiders as saying Napster is seeking licensing agreements that would allow listeners to download music onto portable devices and to copy songs onto compact discs.

Free service

In February last year, Napster made a $1bn offer to settle the case if the major labels would license their catalogues to the company.

The record labels rejected the offer and Napster's free service was shut down last July.

Whatever the outcome of the case, the online music situation remains unstable.

Last month, Judge Patel said Napster had raised "significant issues" on whether the recording music was monopolising its music.

Recent report

Napster has asked the US Government to intervene and force the big six companies to release their music to other services for a fixed cost-per-song rate.

There have also been reports that the EU is concerned over a "duopoly" forming between MusicNet and Pressplay.

And a recent report has said legitimate online music services had failed to replace Napster and similar copyright-breaking services.

The report said legitimate, paid-for music downloads earned only $1m (�710,000) in the US and UK last year.

At the same time, some eight billion tracks were exchanged by users of pirate sites offering free music downloads - and up to 2.7m people at any one time are logged on to them.