A New York federal judge recently ruled that ReDigi, a company that allows people to upload their old song files to resell to others (while deleting them on their own computers) was liable for copyright infringement. Capitol Records sued the tech start-up in 2012 in a closely-watched case with potential to set a new precedent for the use of the first sale doctrine—which allows someone who legally purchased a copyrighted good to resell it to a third party—for the digital age.

Redigi argued that its software prevents the users selling their material from retaining a copy for themselves, which would cover them under the first-sale doctrine. The company further argued that because money earned from selling “used” digital music files can only be spent on new music from existing digital music retailers, that it would actually encourage more customers to purchase new music, benefiting the existing players in the digital music marketplace. Capitol Records and U.S. District Judge Richard Sullivan did not agree with this assessment.

Since the lawsuit’s inception ReDigi has updated its software several times, but only version 1.0 was considered in the suit, so the case is not necessarily a death knell for the nascent music reseller. However, many argue that this will have a large impact on future technology start-ups, and that this ruling solidifies a marketplace reality that digital music and books may not generally be resold, unlike their physical counterparts.

Capitol Records and Redigi will file a joint letter by April 12 detailing the next steps in the case, and anyone interested in the law surrounding ownership of digital goods would do well to pay close attention to this story.