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said it is developing the technology needed to implement a membership-based business model that the online song-swapping service hopes the recording industry would support.

Napster hopes to move to a membership-based service as soon as possible and is creating a system that allows the transfer of music files between users without infringing on the copyrights of record companies.

Napster said the move will allow the site to maintain its current structure, but will restrict certain actions with transferred music files, such as limiting the ability of users to burn music files onto CDs.

The new technology will be implemented by

Digital World Services

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a unit of


, the German media giant that signed a

distribution deal with Napster last year.

On Monday, a

U.S. Circuit Court of Appeals

panel ruled that the major record labels challenging Napster's network "have substantially and primarily prevailed on appeal," though the ruling won't be enforced immediately.