Indirect Copyright Infringement Liability for an ISP: An Application of the Theory of the Economics of Contracts under Asymmetric Information

23 Pages Posted: 6 Jan 2019

See all articles by Richard Watt

Richard Watt

University of Canterbury - Economics and Finance; The Society for Economic Research on Copyright Issues (SERCI)

Frank Mueller-Langer

European Commission, Joint Research Center; Max Planck Institute for Innovation and Competition

Date Written: December 31, 2018

Abstract

Under current copyright law in many countries, Internet Service Providers (ISPs) can be found liable for the traffic on the websites that they host. While the ISPs themselves are not undertaking acts that infringe copyright, indirect liability asserts that they either contribute to, or encourage in some way, infringing activities, and thus they are liable to claims of indirect involvement by the affected copyright holders. The present paper explores indirect liability in a standard principal-agent setting, where both moral hazard (the act of monitoring) and adverse selection (differential costs of monitoring over ISPs) are present. The model considers the kinds of contracts that could be signed between the copyright holders (acting through a collective) and the ISPs (acting individually). We specify the contracts that are self-selecting and incentive compatible for the set of feasible scenarios.

Suggested Citation

Watt, Richard and Mueller-Langer, Frank, Indirect Copyright Infringement Liability for an ISP: An Application of the Theory of the Economics of Contracts under Asymmetric Information (December 31, 2018). Review of Economic Research on Copyright Issues, 2018, 15(2), 57-79. Available at SSRN: https://ssrn.com/abstract=3311021

Richard Watt (Contact Author)

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

The Society for Economic Research on Copyright Issues (SERCI) ( email )

Apartado de correos 1100
Palma de Mallorca, 08080
Spain

Frank Mueller-Langer

European Commission, Joint Research Center

Seville
Spain

Max Planck Institute for Innovation and Competition ( email )

Munich
Germany

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