Efficient Copyright Filters for Online Hosting Platforms

In this paper, we build a theoretical model in which an online hosting platform can develop a copyright filter to screen content that contributors wish to upload. The technology is imprecise, since non-infringing material may be incorrectly filtered out. Once the content is hosted on the platform, a right-holder may send a take-down notice if its own automated notice system, also imprecise, finds it to be copyright infringing. We investigate the efficient design of regulation and liability and we find that (i) the right-holder should be given incentives to evaluate fair use when submitting a notice and (ii) the platform should be fined if the take-down to notice ratio is above some predetermined threshold. Such dual system would achieve efficient copyright enforcement without excluding fair-use material