(FORTUNE Magazine) – The music industry may have won the battle against Napster, which recently filed for bankruptcy as part of a plan to sell its assets to Bertelsmann. But the victory comes in the midst of a larger war. The Recording Industry Association of America has begun aggressively pursuing companies whose employees have created mini-Napsters by downloading tunes onto company servers and sharing them with folks in the cubicles next door. "We think this could be a significant problem," says RIAA President Cary Sherman.

The RIAA sends out letters every month asking companies to shut down illegal music exchanges. Thompson Hine, a national law firm based in Cleveland, recently became a target; the firm is investigating and so far believes any piracy involved a small number of IT employees. But if the RIAA thinks companies tout, or even tolerate, file-sharing systems, the results can be costly. In April it announced a $1 million settlement with Integrated Information Systems, a technology consulting company. IIS says that after being contacted by the RIAA, it immediately removed its employees' digital jukebox. But the trade group insisted that IIS either pay the $1 million or go to court, where the penalty might have been higher. "We wanted to send a signal," says Sherman, "that this kind of inappropriate conduct will not be tolerated."

The RIAA gets most tips from disgruntled ex-employees who call its anonymous hot line (800-BADBEAT). With so many layoffs at tech firms--where file sharing abounds--it seems there are plenty of whistle blowers who are eager to dial in.

--Jeremy Kahn