Launched in late 2011, ReDigi is an online marketplace where customers can upload and share digital music. What set the company apart from standard online file sharing platforms, however, was its ability to verify that sellers had originally acquired the content through legitimate means prior to putting it up for auction. Unfortunately, this unique approach has not satisfied music industry opponents who insist that the business model should not be covered by the first-sale doctrine and thus constitutes pervasive copyright infringement.

Capitol Records defended those assertions in a lawsuit filed in January 2012. After a series of legal volleys were fired by each side, a New York District Court recently found ReDigi in violation of copyright law despite its ability to prevent customers from copying files after their online transactions are made.

"[C]ourts have not previously addressed whether the unauthorized transfer of a digital music file over the internet - where only one file exists before and after the transfer - constitutes reproduction within the meaning of the Copyright Act. The court holds that it does," District Judge Richard Sullivan wrote.

This decision stands as a significant blow to resellers of all digital content, according to The New York Times, including burgeoning business ventures surrounding eBooks as well. ReDigi has asserted that the latest version of its proprietary technologies do indeed comply with copyright codes, but the resultant damages from this latest verdict could be a considerable setback to company progress.