The Internet music service Napster has been told by a US federal Judge that she is seeking a fair and workable way of enforcing copyright protections that will radically alter the company's service.
Currently, people can download and share music files for free from Napster. The recording industry say they are losing revenue because of this and that Napster are facilitating breach of copyright.
The company have offered music firms $1 bn to settle the copyright infringement suit, was roundly rejected by the Recording Industry Association of America.
The trade group dismissed the plan, which would have given Napster license to continue using copyrighted content, anticipating victory in its landmark case.
There is already speculation over whether Napster will be able to act on the injunction as it is in the process of developing a subscriptions-based service with Bertelsmann which will not be in place until later this year.
"The reason for this hearing today is to discuss not what if, but what an injunction should look like," said US District Judge Ms Marilyn Hall Patel.
The landmark court battle over Napster's future is viewed as a defining case for copyrights in cyberspace, affecting the way books, movies and all entertainment will be distributed online for years to come.
At today's hearing, Napster's lawyers said the company was racing to develop new software to filter out copyrighted material and hoped soon to reach agreement with the recording industry on how to identify such material.
"We have come considerably closer together on the issue of an injunction," attorney Mr David Boies said. "Sometime this week we will have completed the software implementation so that these file names will be blocked."
Lawyers for the recording industry urged Judge urged Patel not to delay the injunction.
"It is an ongoing, long and tedious process," Mr Russ Frackman, attorney for the Recording Industry Association of America (RIAA), said. "It is not our view that we should wait for relief for this process to run its course."
Napster's service has attracted about 60 million users who swap songs for free by trading MP3 files, a compression format that turns music on compact discs into small digital files.
The major recording companies, represented by the RIAA, first sued Napster in December 1999, claiming it was a haven for copyright piracy that could cost them billions of dollars in lost sales.
Judge Patel is not expected to issue her injunction from the bench today but is thought to be talking to both parties on how best to implement it.
"What we've asked for is to have some input in the injunction process and we are looking for ways to comply with the language in the 9th circuit opinion," Mr Hank Barry, Napster's chief executive, said this week.
Judge Patel issued the injunction last July, but a federal appeals court two days later issued a stay of her ruling pending review.