Things get interesting when you apply Monolith to copyrighted files. For example, munging two copyrighted files will produce a completely new file that, in most cases, contains no information from either file. In other words, the resulting Mono file is not "owned" by the original copyright holders (if owned at all, it would be owned by the person who did the munging). Given that the Mono file can be combined with either of the original, copyrighted files to reconstruct the other copyrighted file, this lack of Mono ownership may be seem hard to believe.Link
Consider this simple fact: for a given Element file and any other file of the same length (call it fileA), it is possible to choose a Basis file that, when munged with the Element, will produce fileA as the resulting Mono file. Therefore, if a copyright holder claims that she owns the information in all Mono files that are munged from her work, she is also claiming copyright over all possible binary files that are the same length as her work. For example, suppose that fileA is an MP3 of a Beatles song, and the Element file is an MP3 of a Britney Spears song copyrighted by Jive Records. It is possible to find a Basis file that, when munged with the Spears song, will produce the Beatles song as the Mono file. Jive Records certainly cannot claim copyright over the Beatles song (which is copyrighted by Apple Records), nor can they claim copyright over any other Mono files munged from MP3s of their songs.
What does this mean? This means that Mono files can be freely distributed.
Update: Ernest Miller says, more or less, BFD: "The conceit of the concept is that neither the cryptotext nor the key is copyrighted. Thus, it should be legal to distribute both. Otherwise, the author of Monolith claims, everything is copyrighted and nothing can be distributed because there is always a number such that, if XOR'd with another number, will produce a copyrighted work. This argument is not new and it not terrible interesting. It basically postulates that any encrypted transmission of information is actually not a transmission of information at all." Link