German media giant Bertelsmann is linking up with Napster, the rogue internet music site which it is facing in the courts.

BMG, Bertelsmann's music industry subsidiary, will withdraw its lawsuit against the company if the collaboration proves successful.

Bertelsmann is to develop a new secure file-sharing music service with Napster, which achieved instant notoriety with record executives when it launched a site that enabled fans to download and share music free of charge.

Radiohead have been the most high-profile victims of the service, which record companies claim threatens the payment of royalties and the future of the industry.

But Bertelsmann has decided to lend money to Napster to develop a more secure service.

The service will provide payments to copyright holders, including recording artists, songwriters, record companies and music publishers.

Thomas Middelhoff, chairman of Bertelsmann, said rival record and publishing companies should follow his company in embracing music on the net.

He said: "Napster has pointed the way for a new direction for music distribution, and we believe it will form the basis of important and exciting new business models for the future of the record industry."