Redigi has escaped a court injunction that would have prevented it trading throughout the duration of a court battle over alleged copyright infringement.
EMI, one of the world's biggest record companies, sued Redigi alleging that the business is infringing its copyrights. Redigi sells legally-downloaded digital music tracks second hand by copying the files from sellers' computers, deleting the original and then selling the copied file to new users.
EMI applied for a preliminary injunction to ban Redigi from operating its business while the court determined whether the company is liable for copyright infringement, but a US district judge rejected the application and said the issue should be determined at trial, according to a report by news website CNET.
"This is a fascinating issue,” district judge Richard J. Sullivan said, according to a statement on the Redigi website. “It raises a lot of technological and statutory issues," he said.
Redigi chief executive John Ossenmacher said he was "grateful" to the judge for his decision and that the company's technology was "helping consumers unlock billions of dollars of previously unrealized wealth in their digital media collections".
"We hope [the] ruling will help to expedite the trial so that we can get back to our business and providing consumers with access this incredible technology. And we hope [EMI] can get back to their business and find a way to catch up to the times instead of trying to stop the innovation process, denying rights to their paying customers along the way," Ossenmacher said.
EMI said the judge had "accepted our legal arguments on the merits of the dispute" despite not issuing an injunction, according to the CNET report.
"We fully expect that Redigi will ultimately have to answer for its clear acts of infringement," the record company said.
Redigi has claimed that what it does is legal because it is protected by the US' 'first sale' doctrine.
Under US copyright law copyright owners have exclusive distribution rights to their works, but under the 'first sale doctrine' those who subsequently buy a legitimate copy of a copyrighted work and sell it on are exempt from the original owners' claims of infringement. The doctrine's exemption does not apply to licensing agreements.
Redigi has a system for verifying whether music files have been illegally copied, but has acknowledged that it cannot guarantee that customers do not make copies of their files and store them on other devices before selling them through the company, according to the CNET report.
Claire McCracken, technology law specialist at Pinsent Masons, the law firm behind Out-Law.com, has previously said that what Redigi does is in breach of UK copyright laws.
"It is clear that the service Redigi offers through its website would break UK laws," McCracken said. "The act of copying a digital music file for sale, even if the original was lawfully obtained from a download service such as iTunes, is copyright infringement under current UK legislation. UK laws are changing to make some copying of files legal, but even under this planned relaxation, the resale of lawfully purchased MP3s will not be allowed in the UK."