These high-tech Cotton Clubs usually require users to be trusted or at least know someone inside. The files being traded, instead of out in the open, are encrypted - the 21st century equivalent of hiding bathtub gin under a fake floorboard.
Internet file-sharers are operating much like any society that falls under attack. And the very technologies they are using as shields have long been employed by legitimate businesses to protect their data from prying eyes and hackers.
"The software that users are moving toward, it has characteristics that businesses need - which is a high degree of privacy, a high degree of security and the ability to handle large files," said Clay Shirky, a professor of interactive telecommunications at New York University.
Three years after the Recording Industry Association of America's lawyers succeeded in shutting down the Napster file-trading service, the music industry's jihad against unauthorized digital music distribution is reaping an unintended consequence: better, easier-to-use software for exchanging data securely - and even anonymously - on the Internet.
"Thanks to the RIAA, ease of use surrounding encryption technologies, which was never a big deal before, is a big deal now," Shirky said.
The decentralized peer-to-peer technology that enables a computer user to share his or her music collection with strangers remains an unbottled genie - and is now likely to evolve so ever more traffic becomes invisible not just to the entertainment industry's copyright cops but also to repressive governments, inquisitive employers and snooping relatives.
On the file-swapping front, current favorites Kazaa, Morpheus and iMesh are more decentralized and harder to sue than Napster. They are breeding more sophisticated stepchildren just as the RIAA goes after the swappers themselves with lawsuits filed against 260 alleged file sharers.
An upcoming release of the file-sharing program Blubster, for instance, not only makes users more difficult to identify. It also seamlessly encrypts files before they are transferred and decrypts them for the end user.
Another program, called Waste, can be used to set up an encrypted instant-messaging and content-sharing network of up to 50 users. Unlike traditional instant-messaging programs, Waste messages don't pass through a central server.
Waste was pulled by America Online shortly after its release by the company's Nullsoft division, but is still circulating online. Neither AOL nor Nullsoft programmer Justin Frankel returned calls seeking comment. (Nullsoft also released Gnutella - on which many of Napster's successors are based. AOL quickly yanked that program, too, but the damage was done.)
Copyright crackdowns like those staged by the RIAA, the Motion Picture Association of America and the Business Software Alliance have succeeded on at least one front: Because higher security and anonymity tend to make software more difficult to use, fewer people are likely to be engaged in casual copying.
"To some degree, the effort has always been one of pushing down the piracy problem, forcing it down to the hardcore pirate," said Bob Kruger, the BSA's vice president for enforcement.
Matt Oppenheim, the RIAA's senior vice president for business and legal affairs, said it's still possible to undermine pirates - even those operating anonymously. In fact, four university students sued last April were using allegedly more-secure swapping software.
So the race is on to improve and simplify advanced security technologies. Beyond programs like Blubster and Waste, there are projects like Freenet, which has been around since 1999. Downloaded nearly 2 million times, it cannot only trade files but also exchange information and spread censored news to places like China.
Like other programs, it's difficult for the programmers to know exactly how it's being used, but there are clues.
"Our Web site is censored by Chinese government," said Freenet leader Ian Clarke. "I suspect we must have had some effect to justify that."
Though Clarke is well known for his information-needs-to-be-free philosophy, he's also trying to cash in on Freenet's architecture.
Last year, he founded Cematics LLC and the company has since released a prototype of Locutus, which allows users to search corporate networks for information distributed across a wide range of computers.
"Just as Napster or Kazaa allow 12-year-old kids to shares media files over the Internet, Locutus allows corporations to share documents within their organization," Clarke said. "It's kind of like Google for people's hard disks, but with added security. You can define who has permission to find what kind of files."
The shift toward integrating encryption and anonymity tools answer the prayers of privacy advocates who have been warning Internet users for years about the potential problems of using the open network without such protection.
"The recording industry lawsuits may in fact change the ecological pressures on the software developers to encourage more anonymity. I think that's a good outcome of this," said Cory Doctorow, outreach coordinator at the Electronic Frontier Foundation. "What it won't do is legalize what 60 million people are up to and it won't ... pay any artists."
By Matthew Fordahl