(Bloomberg) -- A virtual marketplace designed to resell digital music files as if they were secondhand vinyl records runs afoul of copyright law, a U.S. appeals court ruled in a victory for record labels.

ReDigi Inc., a closely held company that provides a platform for the resale of legally purchased music files, had argued that its service facilitated the transfer of music from one recipient to another without duplicating the original file.

The appeals court said that the transfers created duplicate copies of the music files so were not allowed under U.S. law. Any change to develop rules for secondhand sales of digital files would be up to Congress, the U.S. Court of Appeals for the Second Circuit rules in the closely watched case.

“The establishment of ReDigi’s resale marketplace would benefit some, especially purchasers of digital music, at the expense of others, especially rightsholders," wrote Circuit Judge Pierre Leval for the three-judge panel. The music companies effectively would be in competition with secondhand merchandise that, “unlike second hand books and records,” are “as good as new.”

It was a victory for Capitol Records LLC, which had won a $3.5 million judgment in federal court in New York City.

Representatives of Capitol didn’t immediately comment on the case. Officials at ReDigi didn’t immediately respond to requests for comment.

The case is Capitol Records LLC v. ReDigi Inc., 16-2321, U.S. Court of Appeals for the Second Circuit.

To contact the reporter on this story: Christopher Yasiejko in Wilmington, Delaware, at cyasiejko1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, ;David Glovin at dglovin@bloomberg.net, Elizabeth Wasserman

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