Dude, it technically is illegal to sell replica mp3 players. So the company had every right to shut him down. He's lucky he didn't get sued anyway.
If you look at the pictures, they look very similar indeed to the Major Manufacturer's product. In their position I'd do the same thing.
IANAL, TINLA, and in particular I never got around to studying this area of law.
(I can't see the image of his player because it won't load for me)
It looks like a shuffle, with buttons replacing the wheel (nano would need a screen and be far more expensive)
> (I can't see the image of his player because it won't load for me)
They gave him a chance to stop before he had to spend any money on court. That's a good thing, not bad!