How (Not) To Sell Beatles MP3s

A few days ago, a relatively unknown company named BlueBeat popped up and started streaming and selling Beatles MP3s online for 25 cents each. This caught the attention of many people for a number of reasons: for one, there is no legal way of getting Beatles music in digital format. Also... BlueBeat does not own any Beatles music. Yet they claimed they were doing something completely legal.

Today, we learned about BlueBeat's bizarre legal defense, summarized here by ArsTechnica:

Risan is making the claim that he has created a new "audio-visual work" from the original sound recordings by running them through some sort of "psycho-acoustical" model and adding some artist pictures into the MP3 file.

BlueBeat argues that this constitutes a whole new recording and therefore is an original work. Since they own the rights to it, they can sell it legally.

It remains unclear if making an MP3 alone is good enough to constitute a "psycho-acoustical model", or if they ran the music through some additional filter.