The 9th U.S. Circuit Court of Appeals hinted that it might allow Napster to continue operating while litigation proceeds with the Recording Industry Association of America, which alleges that Napster allows millions of users to download copyrighted material without permission.

Napster maintains that the case is the recording industry’s attempt to keep a “chokehold” on music distribution.

The three-judge panel has already expressed concerns about the injunction and will try to determine whether it was overly broad, said Marcie Mihaila, an appellate lawyer who has followed the case.

During the October 2 hearing, attorneys for each side had 20 minutes to make their case. A decision is not expected for at least a month.

The court, through its questioning, suggested October 2 that U.S. District Court Judge Marilyn Hall Patel’s injunction shutting down Napster prohibited legal uses of the music-sharing software such as the trading of noncopyrighted music.

A federal judge had issued an injunction against Napster in July, saying it was encouraging “wholesale infringing” against music industry copyrights.

But hours before Napster’s computer servers were to power down, the appeals court stayed the injunction, keeping the company’s service alive.

Lawyers for Redwood City-based Napster, which claims to have 22 million users, were trying to persuade the three-judge court panel to keep the stay in place, pending a trial of the RIAA’s lawsuit against Napster.

We’re looking for a trial without being shut down before the trial,” said Napster lawyer David Boies, who defended the company, saying it allows the sharing of music for noncommercial uses.

The lower court’s injunction was “unprecedented” against a company that supplies “technology that is capable of a … noninfringing use,” Boies said. RIAA lawyer Russell Frackman countered that the music industry is not “trying to stop the Internet,” but wants to stop Napster from allowing its users to swap pirated music.

“It’s exactly what the system has done,” he said, adding that Napster should be held liable just as one who runs a swap meet is liable for pirated music sold there.

Judge Mary Schroeder, who was part of the 9th Circuit U.S. Circuit Court of Appeals in 1996 when it decided swap meet organizers should be liable, countered: “This is truly different than that. Napster doesn’t have any idea of what’s being transmitted.”

Napster has said it cannot separate copyrighted material from noncopyrighted material and would have no choice but to totally shut down its service if the injunction goes into effect.