  We propose a methodology to detect and isolate link failures in a weighted
and directed network of identical multi-input multi-output LTI systems when
only the output responses of a subset of nodes are available. Our method is
based on the observation of jump discontinuities in the output derivatives,
which can be explicitly related to the occurrence of link failures. The order
of the derivative at which the jump is observed is given by $r(d+1)$, where $r$
is the relative degree of each system's transfer matrix, and $d$ denotes the
distance from the location of the failure to the observation point. We then
propose detection and isolation strategies based on this relation. Furthermore,
we propose an efficient algorithm for sensor placement to detect and isolate
any possible link failure using a small number of sensors. Available results
from the theory of sub-modular set functions provide us with performance
guarantees that bound the size of the chosen sensor set within a logarithmic
factor of the smallest feasible set of sensors. These results are illustrated
through elaborative examples and supplemented by computer experiments.
