I haven't seen the case law, but from the following commentary, I'd say the issue isn't so clear-cut:
> However, if the service provider becomes aware of a "red flag" from which infringing activity is apparent, it will lose
the limitation of liability if it takes no action. The "red flag" test
has both a subjective and an objective element. In determining
whether the service provider was aware of a "red flag," the subjective
awareness of the service provider of the facts or circumstances
in question must be determined. However, in deciding whether
those facts or circumstances constitute a "red flag"—in other words,
whether infringing activity would have been apparent to a reasonable
person operating under the same or similar circumstances—
an objective standard should be used.
So, the defense that infringement is "impossible to verify unless the owner of the copyright gives a notice" probably doesn't apply. If the site owner reasonably should have known of the infringement, safe harbor protection is forfeited.
The moral is that you need to be proactive about removing infringing content. Yes, it's true that YouTube doesn't take down every offending video. But they (at least claim to) actively monitor for infringement to the best of their abilities:
Disclaimer: Don't take my advice here as a comprehensive guide to DMCA compliance. My comments are a far cry from that.
Edit: I should add that I'm not offering an opinion as to whether the OP's site violated the DMCA, or whether the RIAA's takedown was valid. My comments were meant to apply generally, not to the OP's specific case.
You could argue that, YouTube has maintained their safe harbour, and hence they're a reasonable entity. It wasn't apparent to them that copyright was being breached so the "red flag" is not apparent to a reasonable entity, i.e. if the embeder is liable so is YouTube. This makes sense but I don't if it would be convincing elsewhere.
> You could argue that, YouTube has maintained their safe harbour, and hence they're a reasonable entity.
That's not how the reasonable person standard works. "Reasonable person" is a term of art. A reasonable person is a sort of thought experiment that's used often in law. We imagine a hypothetical person who is in most respects like the average person, and who makes sound judgments based on the information available to him or her. We then hold real legal entities, such as website proprietors in DMCA cases, to the standard of this hypothetical reasonable person. For example, we say that a reasonable person running such and such website would have noticed copyright infringement, and thus the website's proprietor was obligated to remediate the infringement.
The fact that YouTube has maintained its safe harbor means YouTube is successful in that regard. It doesn't tell us anything about the legal definition of a "reasonable person."
> However, if the service provider becomes aware of a "red flag" from which infringing activity is apparent, it will lose the limitation of liability if it takes no action. The "red flag" test has both a subjective and an objective element. In determining whether the service provider was aware of a "red flag," the subjective awareness of the service provider of the facts or circumstances in question must be determined. However, in deciding whether those facts or circumstances constitute a "red flag"—in other words, whether infringing activity would have been apparent to a reasonable person operating under the same or similar circumstances— an objective standard should be used.
Source: http://www.gpo.gov/fdsys/pkg/CRPT-105hrpt551/pdf/CRPT-105hrp...
So, the defense that infringement is "impossible to verify unless the owner of the copyright gives a notice" probably doesn't apply. If the site owner reasonably should have known of the infringement, safe harbor protection is forfeited.
The moral is that you need to be proactive about removing infringing content. Yes, it's true that YouTube doesn't take down every offending video. But they (at least claim to) actively monitor for infringement to the best of their abilities:
http://www.youtube.com/t/video_id_about
Disclaimer: Don't take my advice here as a comprehensive guide to DMCA compliance. My comments are a far cry from that.
Edit: I should add that I'm not offering an opinion as to whether the OP's site violated the DMCA, or whether the RIAA's takedown was valid. My comments were meant to apply generally, not to the OP's specific case.