I believe Dropbox uses a method analogous to block-level dedupe. That is, files are split up into smallish chunks and then the chunks are what get "deduplicated". A "file" basically consists of a list of pointers to chunks.
This makes things extra problematic because completely unrelated files might share chunks. Standard file formats may lead to duplicate headers. Or consider a political science textbook that contains a complete copy of the US Constitution, and a file that contains just the US Constitution. One is perfectly legal to distribute freely, the other may not be, but both might share some common blocks, and a federal judge with a shoot-first mentality might craft an order requiring the deletion of those common blocks.