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But Hilbers made progress with two of the more peace-minded labels. “By the end of this third quarter in 2001, we had two settlement and licensing deals on the table ready to be signed by AOL and EMI,” Hilbers said. The deal with AOL called for $20 million in settlement money, $5 million in an immediate advertising purchase, and $20 million in future advertising. Of course, it would take Bertelsmann's money to make it happen, and Hilbers passed up word of the pacts. “Thomas Middelhoff was in favor of the deal,” Hilbers said. But “he did not convince his fellow board members to give us the money.” The board wanted all of the majors at once. They said, “We are not going to invest now a substantial amount of money in Napster, exercise our warrant, and then find [our]selves in litigation with Universal, Sony, and BMG,” Hilbers said.

AOL, whose quest for end-of-quarter ad revenue by any means would soon land it in trouble with regulators, took the board-level reversal especially hard. “AOL is really pissed,” Hilbers wrote to Middelhoff. “They backed out of the RIAA negotiation and now we took the deal off the table.” It took a call from Middelhoff to AOL executive Richard Parsons to smooth things over.

The industry rebuffed Hilbers's request for a moratorium in the legal fight, wanting to close the door by winning the case against Napster in a motion for summary judgment. Given Patel's previous rulings, it seemed like a sure thing. And it would have been, were it not for the record industry's one big mistake. In forming MusicNet and Pressplay, the labels had acted very much in concert. Napster general counsel Jonathan Schwartz, a Barry recruit and a former Justice Department official, raised the last-ditch defense that since copyright law calls for a balance between the rights holders and the public, a cartel should not be allowed to set the terms by which the public will get access—that would amount to copyright misuse and a violation of public policy. For an industry already subject to antitrust accusations, the joint ventures were less than smart, and Patel let them know it. In an October 2001 hearing on the industry's request for summary judgment, a day that could well have been Napster's end, she instead took the industry to task for the joint ventures. “I'm really curious about how the plaintiffs in this came upon the idea,” Patel said. “Even if it passes antitrust tests, it still looks bad, sounds bad, and smells bad.” Patel put off ruling on summary judgment to allow yet

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