Napster, the infamous music file sharing service, faces the most crucial court judgment in its chequered history in San Francisco later today.

Judge Marilyn Hall Patel will rule on whether the song-swapping site should be forced to pay damages to record companies for copyright violations that occurred while it was operating as an illegal service.

Napster has since made an uneasy peace with the record giants and is currently offline pending its relaunch later this year. With the major labels also poised to launch their own subscription-based download services, MusicNet and PressPlay, many analysts argue Napster is no longer as significant a target as it once was.

Many of Napster's users, which at the height of its popularity numbered over 60m, have migrated to other illegal song-sharing services that are even harder for record companies to keep track of.

The court case is being brought by the Recording Industry Association of America, which claims its members were robbed of significant royalties by Napster.

It will argue that Napster is liable, leaving just the final amount of damages to be decided if the judge rules in its favour.

Earlier this year Napster offered the record companies $1bn (£679m) in damages, an amount that was dismissed out of hand by the record companies. It will argue that a summary judgement is inappropriate and push for a full trial.

Music industry experts suggest the judge will find against Napster but that the final level of damages will be lower than expected, owing to the fact that the company has been out of the spotlight and has since struck deals with the record companies concerned.

Helen Smith, the director of legal and business affairs at the Association of Independent Music, which represents hundreds of independent labels, said: "We've entered into a commercial deal with Napster so it's difficult to comment. However, respect for copyright is of utmost importance and that is why AIM took steps to secure a deal with Napster."

The RIAA lawsuit was originally filed in December 1999 and is backed by AOL Time Warner, EMI, Vivendi Universal and Bertelsmann. To complicate matters further, Bertelsmann now has a stake in Napster and installed one of its employees as chief executive earlier this year.