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Napster Stays Open as Competiton Heats Up

Just hours before a federal court order was to shut down the popular music-exchnage service, Napster, an appeals court stepped in. Late Friday, it stayed execution of Wednesday's order, allowing Napsters to continue operating while the courts consider Napster's appeal. The order issued on Wednesday by U.S. District Judge Marilyn Hall Patel would have forced Napster to shut down late Friday.

"The preliminary injunction issued by the district court in this matter is stayed pending further order of this court," the appellate judges said, noting that Napster's lawyers had raised "substantial questions" about the injunction they said would put the service out of business.

Lead Napster attorney David Boies told Reuters the stay would allow the company to resubmit its argument that its users are legally sharing their own property and that Napster itself should not be held responsible.

"The individual user has an absolute right to share music," Boies said on CNNfn. "The problem is the RIAA seems determined to kill this new medium. If that's so, we're not going to go quietly into that night. We're going to fight."

The decision was a stinging defeat for the Recording Industry Association of America (RIAA), which in December sued Napster for facilitating wholesale music piracy.

"It is frustrating, of course, that the tens of millions of daily infringements occurring on Napster will be able to continue, at least temporarily," RIAA President and CEO Hilary Rosen said in a statement. "We look forward to the day when the infringements finally cease."

Just after the decision, Napster released a statement applauding the decision, saying the technology behind the popular product can benefit artists, consumers and the industry.

"New technologies can be a win-win situation if we work together on building new models -- and we at Napster are eager to do so," the company said.

Napster founder Shawn Fanning said the company was pleased that its 20 million users would not be turned away. Meanwhile, he said the company will continue to encourage users to participate in its "buycott." The company is spearing a drive to get Napster users to purchase CDs of artists who are supporting the technology.

The latest news comes as other file-sharing services are facing similar legal battles. Scour Inc., the Michael Ovitz-backed multimedia search site last week, was hit with a lawsuit from the Motion Picture Association of America and the National Music Publishers Association.

In a 25-page brief filed in U.S. District Court, these organizations allege Scour is Public Enemy No. 2 behind Napster for providing Scour Exchange, which enables consumers to snap up movies and music.

Meanwhile, several companies in the field have stepped up work on business models that monetize, or give content owners control, over digital content. In fact, Napster co-founder Bill Bales and early Napster investor Adrian Scott last week launched AppleSoup, which will allow content-owners to distribute "anything digital" online.

Anything, that is, except music. Though Bales wouldn't divulge exactly what AppleSoup's machinations would be just yet, he told internetnews.com the business model revolved around "protecting copyrights and partnering with content-owners and content-creators."

Another new service is trying to mix MP3 file exchange with paid promotional announcements. Digital Payloads Inc. launched two weeks ago with the brazen announcement that it was dropping a "bombshell on Internet music wars," the start-up is a digital media promotions company that embeds record label or advertiser promotionsan