10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2012

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number 001-34108

DIGIMARC CORPORATION

(Exact name of registrant as specified in its charter)

Oregon	26-2828185
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9405 SW Gemini Drive, Beaverton, Oregon 97008

(Address of principal executive offices) (Zip Code)

(503) 469-4800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.001 Par Value Per Share	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of common stock, par value $0.001 per share, held by non-affiliates of the registrant, based on the closing price of our common stock on The Nasdaq Global Market on the last business day of the registrant’s most recently completed fiscal second quarter (June 29, 2012), was approximately $174 million. Shares of common stock beneficially held by each officer and director have been excluded from this computation because these persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purposes.

As of February 15, 2013, 7,281,983 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement pursuant to Regulation 14A for its 2013 annual meeting of shareholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K.

EXPLANATORY NOTE

Digimarc Corporation is filing this Amendment No. 1 (“Amendment No. 1”) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the “Form 10-K”) in response to comments received from the Staff of the Securities and Exchange Commission regarding (i) the Form 10-K, and (ii) a request for confidential treatment of certain portions of Exhibit 10.2 originally filed with the Form 10-K. We are filing this Amendment No. 1 solely to re-file Exhibit 10.2, re-file Exhibit 23.1 and amend and restate Part II Item 8 and Part IV Item 15 included in the Form 10-K. In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, we are filing new certifications by the Company’s principal executive officer and principal financial officer as exhibits to this Amendment No. 1.

Except as described above, no other amendments or updates have been made to the Form 10-K as originally filed. This Amendment No. 1 does not reflect events after the original filing of the Form 10-K and does not modify or update any disclosures in the Form 10-K that may have been affected by subsequent events.

1

PART II

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements and the accompanying Notes that are filed as part of this Annual Report are listed under Part IV, Item 15, Exhibits and Financial Statement Schedules and are set forth beginning on page F-1 immediately following the signature page of this Form 10-K/A.

PART IV

ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

The following documents are filed as part of this Annual Report on Form 10-K:

(i) Report of Independent Registered Public Accounting Firm – KPMG LLP

(ii) Consolidated Balance Sheets as of December 31, 2012 and 2011

(iii) Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010

(iv) Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2012, 2011 and 2010

(v) Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010

(vi) Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

All schedules have been omitted since they are not required or are not applicable or the required information is shown in the consolidated financial statements or related notes.

(a)(3) Exhibits

See the Exhibit Index at page E-1 of this Annual Report on Form 10-K.

(b) Exhibits

See the Exhibit Index at page E-1 of this Annual Report on Form 10-K.

2

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DIGIMARC CORPORATION
Date: August 7, 2013	By:	/s/ Michael McConnell
		Michael McConnell Title: Chief Financial Officer

3

DIGIMARC CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm – KPMG LLP		F-2
Consolidated Balance Sheets		F-3
Consolidated Statements of Operations		F-4
Consolidated Statements of Shareholders’ Equity		F-5
Consolidated Statements of Cash Flows		F-6
Notes to Consolidated Financial Statements		F-7

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Digimarc Corporation:

We have audited the accompanying consolidated balance sheets of Digimarc Corporation and subsidiary as of December 31, 2012 and 2011 and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Digimarc Corporation and subsidiary as of December 31, 2012 and December 31, 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Digimarc Corporation’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 22, 2013 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Portland, Oregon

February 22, 2013

F-2

DIGIMARC CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31, 2012		December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	6,866	$	3,419
Marketable securities		25,403		22,244
Trade accounts receivable, net		4,216		3,502
Other current assets		1,016		1,306
Total current assets		37,501		30,471
Marketable securities		6,787		7,715
Property and equipment, net		1,453		1,395
Intangibles, net		6,721		2,808
Goodwill		1,114		—
Investments in joint ventures		—		415
Deferred tax assets, net		3,589		2,634
Other assets		166		355
Total assets	$	57,331	$	45,793
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	1,143	$	952
Deferred revenue		2,512		2,660
Total current liabilities		3,655		3,612
Deferred rent and other long-term liabilities		673		464
Total liabilities		4,328		4,076
Commitments and contingencies (Note 16)
Shareholders’ equity:
Preferred stock (par value $0.001 per share, 2,500,000 authorized, 10,000 shares issued and outstanding at December 31, 2012 and 2011)		50		50
Common stock (par value $0.001 per share, 50,000,000 authorized, 7,168,359 and 7,008,031 shares issued and outstanding at December 31, 2012 and 2011, respectively)		7		7
Additional paid-in capital		39,869		34,511
Retained earnings		13,077		7,149
Total shareholders’ equity		53,003		41,717
Total liabilities and shareholders’ equity	$	57,331	$	45,793

See Notes to Consolidated Financial Statements.

F-3

DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Revenue:
Service	$	10,792		$	12,395		$	12,324
License and subscription		33,583			23,644			18,826
Total revenue		44,375			36,039			31,150
Cost of revenue:
Service		5,917			6,638			6,464
License and subscription		591			299			236
Total cost of revenue		6,508			6,937			6,700
Gross profit		37,867			29,102			24,450
Operating expenses:
Sales and marketing		3,827			4,336			3,545
Research, development and engineering		8,741			7,327			5,687
General and administrative		9,457			9,956			7,864
Intellectual property		1,248			1,094			1,203
Total operating expenses		23,273			22,713			18,299
Operating income		14,594			6,389			6,151
Net loss from joint ventures		(1,107	)		(2,714	)		(2,180	)
Interest income, net		179			195			245
Income before income taxes		13,666			3,870			4,216
(Provision) benefit for income taxes		(5,394	)		1,786			(42	)
Net income	$	8,272		$	5,656		$	4,174
Earnings per common share:
Net income per common share—basic	$	1.16		$	0.84		$	0.59
Net income per common share—diluted	$	1.12		$	0.76		$	0.55
Weighted average common shares outstanding—basic		6,757			6,741			7,120
Weighted average common shares outstanding—diluted		6,989			7,430			7,623
Cash dividends declared per common share	$	0.33		$	—		$	—

See Notes to Consolidated Financial Statements.

F-4

DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share data)

	Preferred Stock				Common Stock					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Total Shareholders’ Equity
	Shares		Amount		Shares			Amount
BALANCE AT DECEMBER 31, 2009		10,000	$	50		7,205,701		$	7	$	49,283		$	(2,681	)	$	46,659
Exercise of stock options		—		—		313,832			—		3,045			—			3,045
Issuance of restricted common stock		—		—		124,560			—		—			—			—
Forfeiture of restricted common stock		—		—		(3,450	)		—		—			—			—
Purchase and retirement of common stock		—		—		(197,193	)		—		(5,824	)		—			(5,824	)
Stock-based compensation		—		—		—			—		3,105			—			3,105
Net loss		—		—		—			—					4,174			4,174
BALANCE AT DECEMBER 31, 2010		10,000		50		7,443,450			7		49,609			1,493			51,159
Exercise of stock options		—		—		169,420			—		1,651			—			1,651
Issuance of restricted common stock		—		—		190,180			—		—			—			—
Forfeiture of restricted common stock		—		—		(18,120	)		—		—			—			—
Purchase and retirement of common stock		—		—		(776,899	)		—		(22,048	)		—			(22,048	)
Stock-based compensation		—		—		—			—		4,231			—			4,231
Tax benefit from stock-based awards		—		—		—			—		1,068			—			1,068
Net income		—		—		—			—		—			5,656			5,656
BALANCE AT DECEMBER 31, 2011		10,000		50		7,008,031			7		34,511			7,149			41,717
Exercise of stock options		—		—		172,250			—		1,660			—			1,660
Issuance of restricted common stock		—		—		202,340			—		—			—			—
Forfeiture of restricted common stock		—		—		(12,300	)		—		—			—			—
Purchase and retirement of common stock		—		—		(201,962	)		—		(4,760	)		—			(4,760	)
Stock-based compensation		—		—		—			—		5,414			—			5,414
Tax benefit from stock-based awards		—		—		—			—		3,044			—			3,044
Net income		—		—		—			—		—			8,272			8,272
Cash dividends declared		—		—		—			—		—			(2,344	)		(2,344	)
BALANCE AT DECEMBER 31, 2012		10,000	$	50		7,168,359		$	7	$	39,869		$	13,077		$	53,003

See Notes to Consolidated Financial Statements.

F-5

DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Cash flows from operating activities:
Net income	$	8,272		$	5,656		$	4,174
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment		600			613			565
Amortization and write-off of intangibles		385			143			79
Stock-based compensation		5,256			4,216			3,068
Net loss from joint ventures		1,107			2,714			2,180
Deferred income taxes		(284	)		(3,640	)		—
Tax benefit from stock-based awards		3,688			1,873			—
Excess tax benefit from stock-based awards		(3,044	)		(1,068	)		—
Changes in operating assets and liabilities:
Trade accounts receivable, net		(187	)		(21	)		89
Other current assets		219			240			(473	)
Other assets		201			107			(32	)
Accounts payable and other liabilities		(228	)		(668	)		507
Deferred revenue		(384	)		88			275
Net cash provided by operating activities		15,601			10,253			10,432
Cash flows from investing activities:
Purchase of property and equipment		(570	)		(678	)		(781	)
Capitalized patent costs and purchased intellectual property		(1,170	)		(712	)		(914	)
Investments in joint ventures, net		(692	)		(2,100	)		(2,800	)
Business acquisitions, net of cash acquired		(5,092	)		—			—
Sale or maturity of marketable securities		144,214			74,689			122,176
Purchase of marketable securities		(146,444	)		(65,044	)		(127,878	)
Net cash provided by (used in) investing activities		(9,754	)		6,155			(10,197	)
Cash flows from financing activities:
Issuance of common stock		1,660			1,651			3,045
Purchase of common stock		(4,760	)		(22,048	)		(5,824	)
Cash dividends paid		(2,344	)		—			—
Excess tax benefit from stock-based awards		3,044			1,068			—
Net cash used in financing activities		(2,400	)		(19,329	)		(2,779	)
Net increase (decrease) in cash and cash equivalents		3,447			(2,921	)		(2,544	)
Cash and cash equivalents at beginning of period		3,419			6,340			8,884
Cash and cash equivalents at end of period	$	6,866		$	3,419		$	6,340
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,819		$	13		$	42
Supplemental schedule of non-cash investing activities:
Stock-based compensation capitalized to patent costs	$	108		$	65		$	37
Supplemental schedule of non-cash financing activities:
Exercise of stock options	$	1,660		$	1,651		$	3,038

See Notes to Consolidated Financial Statements.

F-6

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

(1) Description of Business and Summary of Significant Accounting Policies

Description of Business

Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, enables governments and enterprises around the world to give digital identities to media and objects that computers can sense and recognize and to which they can react. The Company’s inventions provide the means to infuse persistent digital information, perceptible only to computers and digital devices, into all forms of media content. The unique digital identifier placed in media generally persists with it regardless of the distribution path and whether it is copied, manipulated or converted to a different format, and does not affect the quality of the content or the enjoyment or other traditional uses of it. The Company’s technology permits computers and digital devices to quickly and reliably identify relevant data from vast amounts of media content.

Principles of Consolidation

The consolidated financial statements include the accounts of Digimarc and its wholly-owned subsidiary. All intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires Digimarc to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Certain of the Company’s accounting policies require higher degrees of judgment than others in their application. These include revenue recognition on long-term license and service contracts, goodwill, impairments and estimation of useful lives of long-lived assets, contingencies and litigation, patent costs, stock-based compensation and income taxes. Digimarc bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Cash Equivalents

The Company considers all highly liquid marketable securities with original maturities of 90 days or less at the date of acquisition to be cash equivalents. Cash equivalents include money market funds, certificates of deposit, commercial paper, and pre-refunded municipal bonds totaling $5,878 and $2,992 at December 31, 2012 and 2011, respectively. Cash equivalents are carried at cost or amortized cost, which approximates market.

Marketable Securities

The Company considers all investments with original maturities over 90 days that mature in less than one year from the balance sheet date to be short-term marketable securities. Both short- and long-term marketable securities primarily include U.S. federal agency notes, U.S. treasuries, corporate notes, pre-refunded municipal bonds, and commercial paper. The Company’s marketable securities are classified as held-to-maturity and are reported at amortized cost, which approximates market.

F-7

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

A decline in the market value of any security below amortized cost that is deemed to be other-than-temporary results in a reduction in the carrying amount. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating that the cost of the investment is recoverable outweighs evidence to the contrary. There have been no other-than-temporary impairments identified or recorded by the Company.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using a method that approximates the effective interest method. Under this method, dividend and interest income are recognized when earned.

Fair Value of Financial Instruments

Accounting Standards Certification (“ASC”) 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the U.S., and enhances disclosures about fair value measurements. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

• Level 1—Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date.

• Level 2—Pricing inputs are quoted for similar investments, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.

• Level 3—Pricing inputs are unobservable for the investment; that is, the inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The estimated fair values of the Company’s financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate their carrying values due to the short-term nature of these instruments. The Company records marketable securities at amortized cost, which approximates fair value.

F-8

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The Company’s fair value hierarchy for its cash equivalents and marketable securities as of December 31, 2012 and 2011, respectively, was as follows:

December 31, 2012	Level 1		Level 2		Level 3		Total
Money market securities	$	901	$	—	$	—	$	901
Certificates of deposits		—		491		—		491
U.S. treasuries		—		289		—		289
U.S. federal agency notes		—		1,637		—		1,637
Pre-refunded and other municipals		—		22,036		—		22,036
Corporate notes		—		10,100		—		10,100
Commercial paper		—		2,614		—		2,614
Total	$	901	$	37,167	$	—	$	38,068

December 31, 2011	Level 1		Level 2		Level 3		Total
Money market securities	$	896	$	—	$	—	$	896
Certificates of deposits		—		736		—		736
U.S. treasuries		—		718		—		718
U.S. federal agency notes		—		7,942		—		7,942
Pre-refunded and other municipals		—		2,800		—		2,800
Corporate notes		—		16,459		—		16,459
Commercial paper		—		3,400		—		3,400
Total	$	896	$	32,055	$	—	$	32,951

The fair value maturities of the Company’s cash equivalents and marketable securities as of December 31, 2012 are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5-10 years		More than 10 years
Maturities	$	38,068	$	31,200	$	6,868	$	—	$	—

Concentrations of Business and Credit Risk

A significant portion of the Company’s business depends on a limited number of large contracts. The loss of any large contract may result in loss of revenue and margin on a prospective basis. Financial instruments that potentially subject Digimarc to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and trade accounts receivable. Digimarc places its cash and cash equivalents with major banks and financial institutions and at times deposits may exceed insured limits. Other than cash used for operating needs, which may include short-term marketable securities with the Company’s principal banks, Digimarc’s investment policy limits its credit exposure to any one financial institution or type of financial instrument by limiting the maximum of 5% of its cash equivalents and marketable securities or $1,000, whichever is greater, to be invested in any one issuer except for the U.S. government, U.S. federal agencies and U.S. backed securities, which have no limits, at the time of purchase. The Company’s investment policy also limits its credit exposure by limiting the maximum of 40% of its cash and cash equivalents and marketable securities, or $15,000, whichever is greater, to be invested in any one industry category, (e.g., financial or energy industries), at the time of purchase. As a result, Digimarc’s credit risk associated with cash and cash equivalents and marketable securities is believed to be minimal.

F-9

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Equity Method Investments

The Company accounts for its joint ventures under the equity method of accounting pursuant to ASC 323 “Investments – Equity Method and Joint Ventures.” Under the equity method, investments are carried at cost, plus or minus the Company’s proportionate share, based on present ownership interests, of: (a) the investee’s profit or loss after the date of acquisition; (b) changes in the Company’s equity that have not been recognized in the investee’s profit or loss; and (c) certain other adjustments. Distributions received from the investee (such as dividends) reduce the carrying amount of the investment.

Goodwill

The Company accounts for business combinations under the acquisition method of account in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.

Contingent consideration is recorded at the acquisition date based upon the estimated fair value of the contingent payments. The fair value of the contingent consideration is re-measured each reporting period with any adjustments in fair value being recognized in earnings from operations.

The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company reviews goodwill in June of each year, or on an interim basis if required, for impairment to determine if events or changes in business conditions indicate that the carrying value of the goodwill may not be recoverable. Such reviews assess the fair value of the assets compared to the carrying values.

Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of ASC 360 “Property, Plant and Equipment.” This statement requires that long-lived assets, including definite-lived intangible assets, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset over its remaining useful life. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Through December 31, 2012, there have been no such impairment losses.

Research and Development

Research and development costs are expensed as incurred in accordance with ASC 730 “Research and Development.”

F-10

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Software Development Costs

Under ASC 985 “Software,” software development costs are to be capitalized beginning when a product’s technological feasibility has been established and ending when a product is made available for general release to customers. To date, the establishment of technological feasibility of the Company’s products has occurred shortly before general release and, therefore, software development costs qualifying for capitalization have been immaterial. Accordingly, the Company has not capitalized any software development costs and has charged all such costs to research and development expense.

Patent Costs

Costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at award date, which varies depending on the pendency period of the application, generally approximating seventeen years. Capitalized patent costs, also referred to as patent prosecution costs, include internal legal labor, professional legal fees, government filing fees and translation fees related to obtaining the Company’s patent portfolio.

Costs associated with the maintenance and annuity fees of patents are accounted for as prepaid assets at the time of payment and amortized over the shorter of the maintenance period or remaining life of the related patent.

Revenue Recognition

See Note 3 for detail disclosures of the Company’s revenue recognition policy.

Stock-Based Compensation

ASC 718 “Compensation – Stock Compensation” requires the measurement and recognition of compensation for all stock-based awards made to employees and directors including stock options and restricted stock based on estimated fair values.

For stock option awards the Company uses the Black-Scholes option pricing model as its method of valuation. The Company’s determination of the fair value on the date of grant is affected by its stock price as well as assumptions regarding a number of highly subjective variables. These variables include, but are not limited to, the expected life of the award, the Company’s expected stock price volatility over the term of the award, the risk-free interest rate and the expected dividend yield. Although the fair value of stock-based awards is determined in accordance with ASC 718 and SAB No. 107 “Shared-Based Payment,” the Black-Scholes option pricing model requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred income taxes reflect the future tax consequences of differences between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not expected to be realized.

F-11

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The Company is subject to federal and state income taxes within the U.S. and in the ordinary course of business, there are transactions and calculations where the ultimate tax determination is uncertain. The Company is also subject to withholding taxes in various foreign jurisdictions. The withholding taxes are computed by the customers and paid to foreign jurisdictions on our behalf. The Company reports a liability (or contra asset) for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to the unrecognized tax benefits in income tax expense.

(2) Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, “Intangibles – Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment,” to allow entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying value. Otherwise, the quantitative impairment test is not required. ASU No. 2012-2 is effective for impairment tests for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The Company has adopted the provisions of this standard and noted no material impact on the financial condition or results of operations of the Company.

(3) Revenue Recognition

The Company derives its revenue primarily from development services and licensing of its patent portfolio:

• Service revenue consists primarily of software development and consulting services. The majority of service revenue arrangements are structured as time and materials consulting agreements and fixed price consulting agreements.

• License revenue, including royalty revenue, originates primarily from licensing the Company’s technology and patents where the Company receives royalties as its income stream. Subscription revenue, which consists of products and services, are more recurring in nature.

Revenue is recognized in accordance with ASC 605 “Revenue Recognition” and ASC 985 “Software” when the following four criteria are met:

(i) persuasive evidence of an arrangement exists,

(ii) delivery has occurred,

(iii) the fee is fixed or determinable, and

(iv) collection is reasonably assured.

Some customer arrangements encompass multiple deliverables, such as patent license, professional services, software subscriptions, and maintenance fees. For arrangements that include multiple deliverables, the Company identifies separate units of accounting at inception based on the consensus reached under ASC 605-25 “Multiple-Element Arrangements,” which provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting if certain criteria are met. The consideration for the arrangement is allocated to the separate units of accounting using the relative selling price method.

F-12

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The relative selling price method allocates the consideration based on the Company’s specific assumptions rather than assumptions of a marketplace participant, and any discount in the arrangement proportionally to each deliverable on the basis of each deliverable’s selling price.

Applicable revenue recognition criteria is considered separately for each separate unit of accounting as follows:

• Revenue from professional service arrangements is generally determined based on time and materials. Revenue for professional services is recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided.

• License revenue is recognized when amounts owed to the Company have been earned, are fixed or determinable (within the Company’s normal 30 to 60 day payment terms), and collection is reasonably assured. If the payment terms extend beyond the normal 30 to 60 days, the fee may not be considered to be fixed or determinable, and the revenue would then be recognized when installments are due.

• The Company records revenue from certain license agreements upon cash receipt as a result of collectability not being reasonably assured.

• The Company’s standard payment terms for license arrangements are 30 to 60 days. Extended payment terms increase the likelihood the Company will grant a customer a concession, such as reduced license payments or additional rights, rather than hold firm on minimum commitments in an agreement to the point of losing a potential advocate and licensee of patented technology in the marketplace. Extended payment terms on patent license arrangements are not considered to be fixed or determinable if payments are due beyond the Company’s standard payment terms, primarily because of the risk of substantial modification present in the Company’s patent licensing business. As such, revenue on license arrangements with extended payment terms are recognized as fees become fixed or determinable.

• Subscription revenue, which includes subscriptions for products and services, is generally paid in advance and s recognized over the term of the license or service period, which is generally one month to twenty-four months.

Deferred revenue consists of billings in advance for professional services, licenses and subscriptions for which revenue has not been earned.

(4) Acquisition of Attributor Corporation

On December 3, 2012, Digimarc acquired Attributor pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among Digimarc, DA Sub Inc., a wholly owned subsidiary of Digimarc (“Merger Sub”), Attributor, and Fortis Advisors LLC, as the representative for Attributor’s security holders. In accordance with the terms of the Merger Agreement, Merger Sub merged with and into Attributor (the “Merger”), with Attributor surviving the Merger as a wholly owned subsidiary of Digimarc.

Under the terms of the Merger Agreement, the closing merger consideration to be paid was $5,632 in cash less certain adjustments. The amount of cash paid by Digimarc after adjustments was $5,442. Additionally, $150 of the closing merger consideration was placed into an escrow account and subject to indemnification claims for a period up to 17 months. The Attributor stockholders may also receive up to an additional $900 of cash consideration that is contingent upon meeting certain performance objectives for the fiscal years ending December 31, 2012 and 2013, as set forth in the Merger Agreement. The contingent cash payment, if earned, will be made in March 2014. In addition, certain key employees of Attributor received $1,000 of restricted shares of common stock of Digimarc, issued pursuant to Digimarc’s 2008 Incentive Plan, which vest over a two-year period and are contingent upon continued employment.

F-13

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The total purchase price is as follows:

Closing merger consideration	$	5,442
Fair value of contingent consideration		190
Total purchase price	$	5,632

The estimated fair value of the contingent consideration of $190 at December 31, 2012 is included in other long-term liabilities on the Consolidated Balance Sheet.

The Company incurred $0.2 million of transaction related expenses associated with the Attributor acquisition during the year ended December 31, 2012, which are reflected in general and administrative expense in the Consolidated Statements of Operations.

Preliminary Purchase Price Allocation

The Company accounted for the transaction using the acquisition method. Under the acquisition method of accounting, total purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price was allocated using the information currently available, and Digimarc may adjust the preliminary purchase price allocation after obtaining more information. The final purchase price allocation is pending the completion of our review of the acquired tax assets and liabilities, which is expected to be completed by mid-2013.

The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. The preliminary allocation of the purchase price estimated at the December 3, 2012 acquisition date is as follows:

Total purchase price				$	5,632
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Cash and cash equivalents	$	350
Trade accounts receivable, net		527
Other current assets		18
Property and equipment, net		102
Deferred tax assets		1,225
Accounts payable and other accrued liabilities		(499	)
Deferred revenue		(225	)
Less: Estimated fair value of identifiable intangible assets acquired:
Existing technology		1,560
Customer relationships		290
Backlog		760
Tradenames		290
Non-solicitation agreements		120
Preliminary goodwill				$	1,114

The goodwill is not deductible for tax purposes. Key factors that make up the goodwill created by the transaction include knowledge and experience of the acquired workforce and infrastructure and expected synergies from the combination of operations.

F-14

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Fair Value of Intangible Assets Acquired

The following table summarizes the estimated fair value of intangible assets acquired, their estimated useful lives and the amortization in the Consolidated Statements of Operations for the year ended December 31, 2012:

	Fair Value		Estimated Life (years)		Amortization Expense
Amortization expense:
Cost of revenue:
Existing technology	$	1,560		5	$	26
Sales and marketing:
Customer relationships		290		7		3
Backlog		760		2		32
Tradenames		290		3		8
General and administrative:
Non-solicitation agreements		120		1		10
Total	$	3,020				79

The fair value of the acquired intangible assets was determined using a discounted cash flow valuation methodology using Level 3 inputs.

The operating results of Attributor are included in the Company’s results of operations since the date of acquisition.

Unaudited Actual and Pro Forma Information

Our consolidated revenues for the year ended December 31, 2012 included $0.2 million from Attributor and our consolidated net income for the year ended December 31, 2012 included a $0.2 million net loss from Attributor subsequent to the acquisition date and without any intercompany allocations. Both revenues and the net loss from Attributor for the year ended December 31, 2012 were negatively impacted by a $0.2 million purchase accounting adjustment.

The following table presents the unaudited pro forma results for the periods set forth below. The unaudited pro forma financial information combines the results of operations as though the acquisition had occurred on January 1, 2011. No pro forma adjustments have been made for our incremental transaction or integration-related costs. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had occurred on January 1, 2011: (in thousands):

	Pro-Forma		Pro-Forma
	Year Ended December 31, 2012		Year Ended December 31, 2011
	(unaudited)		(unaudited)
Revenue	$	49,273	$	39,445
Net income	$	6,807	$	2,265
Net income per common share—basic	$	0.95	$	0.33
Net income per common share—diluted	$	0.92	$	0.30

F-15

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The pro forma information above includes the following pro forma adjustments that effected net income (in thousands):

	Year Ended December 31, 2012			Year Ended December 31, 2011
	(unaudited)			(unaudited)
Revenue adjustment	$	145		$	(233	)
Amortization expense		(830	)		(950	)
Stock-based compensation expense		(505	)		(505	)
Direct transaction costs		190			(190	)
Income tax benefit		834			1,747
Total impact to net income of pro forma adjustments	$	(166	)	$	(131	)

(5) Patent Licensing Arrangement with Intellectual Ventures

On October 5, 2010, the Company entered into a patent licensing arrangement with IV Digital Multimedia Inventions, LLC, a Delaware limited liability company affiliated with Intellectual Ventures (“IV”), pursuant to which the Company granted an exclusive license to sublicense, subject to pre-existing encumbrances and a grant-back license, 597 patents and 288 patent applications held by the Company.

The Company also assigned to IV the related causes of action and other enforcement rights and IV has the sole right, but not the obligation, to prepare, file, prosecute, maintain, defend and enforce the licensed patents at its expense. IV may at any time abandon its license or other rights to all or any of the licensed patents, in which case, certain licensed patents that IV opts to release revert back to the Company.

The Company also entered into a patent rights agreement pursuant to which the Company granted IV an exclusive call option to purchase all or any number of the licensed patents and/or patent applications. The agreement further provides for the grant by IV to the Company the right to put all or any number of patents within the licensed patents to IV if IV threatens or commences an action or proceeding with respect to infringement of a licensed patent.

The financial aspects of the IV agreement for the Company include:

• a license issue fee of $36 million, paid to the Company in increasing quarterly installments over three years ($11,400 in 2011, $12,550 in 2012 and $6,775 in 2013);

• 20% of the profits generated from the IV licensing program, which profits consist of sublicensing and other monetization revenue less specified expenses, including the license issue fee;

• IV assumes responsibility for approximately $1 million per year in prosecution and maintenance costs previously borne by the Company;

• a minimum of $4 million of paid support services over five years from the Company to assist IV in maximizing the value of the licensed assets; and

• a royalty-free grant-back license to the licensed patents to continue the Company’s existing business related to those assets, including maintaining and renewing existing patent licenses, and providing software and services.

F-16

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The payment terms extend beyond the Company’s normal 30 to 60 day payment terms, thus the license revenue is being recognized when the installments are due, and the support services will be recognized as the services are performed.

(6) Segment Information

Geographic Information

The Company derives its revenue from a single reporting segment: media management solutions. Revenue is generated in this segment through licensing of intellectual property, subscriptions to various products and services, and the delivery of services pursuant to contracts with various customers. The Company markets its products in the U.S. and in non-U.S. countries through its sales and licensing personnel.

Revenue, based upon the “bill-to” location, by geographic area is as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Domestic	$	30,736	$	22,660	$	19,034
International (1)		13,639		13,379		12,116
Total	$	44,375	$	36,039	$	31,150

(1) Revenue from the Central Banks, comprised of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is not practicable.

Major Customers

Customers who accounted for more than 10% of the Company’s revenues are as follows:

	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
IV		30	%		33	%		18	%
Verance Corporation (“Verance”)		27	%		*			*
Central Banks		23	%		27	%		30	%
The Nielsen Company (“Nielsen”)		*			11	%		12	%
Arbitron		—			—			14	%

* Less than 10%

(7) Stock-Based Compensation

Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include option grants, restricted stock awards and preferred stock.

Stock-based compensation expense related to internal legal labor is capitalized to patent costs based on direct labor hours charged to capitalized patent costs.

Determining Fair Value

Preferred Stock

The Board of Directors authorized 10,000 shares of Series A Redeemable Nonvoting Preferred stock (Series A Preferred) that were issued to certain executive officers at the time of formation. The Series A Preferred has no voting rights, except as required by law, and may be redeemed at the option of the Company’s Board of Directors at any time on or after June 18, 2013.

F-17

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The Series A Preferred is redeemable based on the stated fair value of $5.00 per share. The Series A Preferred has no dividend rights and no rights to the undistributed earnings of the Company.

Stock Options

Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model. The Company amortizes the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures. Stock options granted generally vest over three to four years for employee grants and one to two years for director grants, and have contractual terms of ten years.

Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the expected life of the award.

Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the expected life of the award.

Expected Dividend Yield. The expected dividend yield used is derived using a formula which uses the Company’s expected annual dividend rate over the expected term divided by the fair value of the Company’s common stock at the grant date.

A summary of the weighted average assumptions and results for options granted are as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011	Year Ended December 31, 2010
Expected life (in years)		N/A	5.28 – 5.75	5.2 – 6.0
Expected volatility		N/A	42% – 44%	52% – 55%
Risk-free interest rate		N/A	1.0% – 2%	2.5% – 3.0%
Expected dividend yield		N/A	0%	0%

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Fair value of stock options granted	$	—	$	2,464	$	1,159

Expected Forfeitures. The Company uses a zero forfeiture for both the stock options granted to employees, which vest monthly, and the stock options granted to the Company’s directors. Initial option grants, for new directors, vest 50% on the first anniversary of the date of grant and then monthly thereafter, and annual option grants, for continuing directors, vest monthly. The Company records stock-based compensation expense only for those awards that are expected to vest, including awards made to directors who are expected to continue with the Company through the year following the date of grant.

F-18

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Restricted Stock

The Compensation Committee of the Board of Directors has awarded restricted stock shares under the Company’s 2008 Stock Incentive Plan to certain employees and directors. The shares subject to the restricted stock awards vest over a certain period, usually three to four years for employees and one year for directors, following the date of the grant. Specific terms of the restricted stock awards are governed by Restricted Stock Agreements between the Company and the award recipients. Restricted stock awards are treated as outstanding when granted.

The fair value of restricted stock awarded is based on the fair market value of the Company’s common stock on the date of the grant (measurement date), and is recognized over the vesting period using the straight-line method.

The Company records stock-based compensation expense for restricted stock awards only for those awards that are expected to vest, including awards made to directors who are expected to continue with the Company through the year following the date of grant.

Stock-based Compensation

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Stock-based compensation:
Cost of revenue	$	603	$	593	$	373
Sales and marketing		409		302		192
Research, development and engineering		840		560		314
General and administrative		3,148		2,568		2,083
Intellectual property		256		193		106
Stock compensation expense		5,256		4,216		3,068
Capitalized to patent costs		108		65		37
Total stock-based compensation	$	5,364	$	4,281	$	3,105

The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under all equity compensation plans, including preferred stock, stock options and restricted stock:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Unrecognized compensation costs	$	8,333	$	9,463	$	6,212

Total unrecognized compensation costs will be adjusted for any future changes in estimated forfeitures.

The Company expects to recognize the unrecognized compensation costs as of December 31, 2012 for stock options and restricted stock over a weighted average periods through December 2016 as follows:

	Stock Options		Restricted Stock
Weighted average period		1.13 years		1.46 years

F-19

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

(8) Net Income Per Common Share

The Company calculates basic and diluted earnings per common share in accordance with ASC 260 “Earnings Per Share,” using the two-class method as the Company’s unvested restricted stock is a participating security given these awards contain non-forfeitable rights to receive dividends. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed.

Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as adjusted for the potential dilutive effect of non-participating securities. The following table reconciles earnings per common share for the year ended December 31, 2012:

	Year Ended December 31, 2012
Basic EPS:
Net income	$	8,272
Less: Net income allocable to participating securities		(426	)
Net income allocable to common shares	$	7,846
Weighted average common shares outstanding – basic (in thousands)		6,757
Basic earnings per common share	$	1.16

	Year Ended December 31, 2012
Diluted EPS:
Net income	$	8,272
Less: Net income allocable to participating securities		(426	)
Net income allocable to common shares	$	7,846
Weighted average common shares outstanding – basic (in thousands)		6,757
Dilutive effect of non-participating securities (in thousands)		232
Weighted average common shares outstanding – dilutive (in thousands)		6,989
Diluted earnings per common share	$	1.12

There were 215,000 common stock equivalents related to stock options that were anti-dilutive and excluded from diluted net income per share calculations for the year ended December 31, 2012 as their exercise prices were higher than the average market price of the underlying common stock for the period.

Net income per common share was calculated under the treasury stock method in prior periods because the impact of applying the two-class method for computing basic and diluted earnings per common share was not material. Basic and diluted net income per share were computed using the weighted average number of common shares outstanding during each period, with diluted net income per share including the effect of potentially dilutive common shares.

F-20

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

	Year Ended December 31, 2011						Year Ended December 31, 2010
	Income (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount		Income (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount
Basic EPS
Income available to common shareholders	$	5,656		6,741	$	0.84	$	4,174		7,120	$	0.59
Effect of Dilutive Securities
Options				393						440
Restricted stock				296						63
Diluted EPS
Income available to common shareholders	$	5,656		7,430	$	0.76	$	4,174		7,623	$	0.55

There were 136,957 common stock equivalents related to stock options that were anti-dilutive and excluded from diluted net income per share calculations for 2011 as their exercise prices were higher than the average market price of the underlying common stock for the period.

There were no common stock equivalents related to stock options that were anti-dilutive for 2010 because their exercise prices were lower than the average market price of the underlying common stock for the period.

(9) Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

	December 31, 2012		December 31, 2011
Trade accounts receivable	$	4,216	$	3,502
Allowance for doubtful accounts		—		—
Trade accounts receivable, net	$	4,216	$	3,502
Unpaid deferred revenue included in accounts receivable	$	1,589	$	2,084

Allowance for doubtful accounts

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade accounts receivable. The Company determines the allowance based on historical write-off experience and current information. The Company reviews its allowance for doubtful accounts monthly. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

F-21

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Unpaid deferred revenue

The unpaid deferred revenue that are included in trade accounts receivable are billed in accordance with the provisions of the contracts with the Company’s customers. Unpaid deferred revenue from the Company’s cash-basis customers are not included in trade accounts receivable nor deferred revenue accounts.

Major customers

Customers who accounted for more than 10% of trade accounts receivable, are as follows:

	December 31, 2012			December 31, 2011
Central Banks		30	%		45	%
Nielsen		24	%		29	%
Civolution		14	%		14	%

(10) Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Repairs and maintenance are charged to expense when incurred.

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally two to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.

	December 31, 2012			December 31, 2011
Office furniture and fixtures	$	420		$	410
Equipment		1,886			1,872
Leasehold improvements		1,083			1,041
Gross property and equipment		3,389			3,323
Less accumulated depreciation and amortization		(1,936	)		(1,928	)
Property and equipment, net	$	1,453		$	1,395

Leases

Future minimum lease payments under non-cancelable operating leases are as follows:

Year ending December 31:	Operating Leases
2013	$	893
2014		890
2015		920
2016		628
2017		—
Thereafter		—
Total minimum lease payments	$	3,331

F-22

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Rent expense on the operating leases are as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Rent expense	$	776	$	866	$	832

(11) Intangibles

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Amortization of capitalized patent costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at award date, which varies depending on the pendency period of the application, generally approximating seventeen years.

Amortization of intangible assets acquired is calculated using the straight-line method over the estimated useful lives of the assets.

	Estimated Life (years)		December 31, 2012			December 31, 2011
Capitalized patent costs		17-20	$	3,973		$	3,035
Intangible assets acquired:							—
Purchased patents and intellectual property		3-10		250			13
Existing technology		5		1,560			—
Customer relationships		7		290			—
Backlog		2		760			—
Tradenames		3		290			—
Non-solicitation agreements		1		120			—
Gross intangible assets				7,243			3,048
Accumulated amortization				(522	)		(240	)
Intangible assets, net			$	6,721		$	2,808

The aggregate amortization expense recorded in 2012, 2011 and 2010 was $315, $124 and $79, respectively. For intangible assets recorded at December 31, 2012, the estimated future aggregate amortization expense for the years ending December 31, 2012 through 2017 is approximately:

Year ending December 31:	Amortization Expense
2013	$	1,061
2014		975
2015		572
2016		477
2017		441

F-23

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

(12) Shareholders’ Equity

Preferred Stock

In June 2008, the Board of Directors authorized 2,500,000 shares of preferred stock, par value $0.001 per share. The Board of Directors has the authority to issue the undesignated preferred stock in one or more series and to determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued series of undesignated preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by the shareholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of the Company without further action by shareholders and may adversely affect the voting and other rights of the holders of common stock.

The Board of Directors authorized 10,000 shares of Series A Redeemable Nonvoting Preferred stock (“Series A Preferred”) that were issued to certain executive officers at the time of formation. The Series A Preferred has no voting rights, except as required by law, and may be redeemed at the option of the Company’s Board of Directors at any time on or after June 18, 2013.

The Series A Preferred is redeemable based on the stated fair value of $5.00 per share. The Series A Preferred has no dividend rights and no rights to the undistributed earnings of the Company.

Common Stock

In June 2008, the Board of Directors authorized 50,000,000 shares of common stock, par value $0.001 per share. The holders of Digimarc common stock are entitled to one vote for each share held of record on all matters submitted to a vote of our shareholders, including the election of directors. Subject to preferences that may be granted to any then outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends as may be declared by the Board of Directors out of funds legally available for such purpose, as well as any distributions to the Company’s shareholders. The Series A Preferred does not have any dividend preferences. In the event of the Company’s liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all of the Company’s assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock. Holders of common stock have no preemptive or other subscription or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and non-assessable.

Stock Incentive Plan

On July 31, 2008 the Company’s Board of Directors initially adopted the 2008 Incentive Plan, or the 2008 Plan. The 2008 Plan provides for the grant of stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance shares, performance units, and cash-based awards, which may be granted to officers, directors, employees, consultants, agents, advisors and independent contractors who provide services to the Company and its affiliated companies.

The 2008 Plan authorizes the issuance of up to 2,500,000 shares of common stock. The shares authorized under the 2008 Plan are subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar event. Shares issued under the 2008 Plan will consist of authorized and unissued shares or shares held by the Company as treasury shares. If an award granted under the 2008 Plan lapses, expires, terminates or is forfeited or surrendered without having been fully exercised or without the issuance of all the shares subject to

F-24

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

the award, the shares covered by that award will again be available for use under the 2008 Plan. Shares that are (i) tendered by a participant or retained by the Company as payment for the purchase price of an award or to satisfy tax withholding obligations or (ii) covered by an award that is settled in cash, or in some manner that some or all of the shares covered by the award are not issued, will be available for issuance under the 2008 Plan. In addition, awards granted as substitute awards in connection with acquisition transactions will not reduce the number of shares authorized for issuance under the 2008 Plan.

Stock Options

As of December 31, 2012, under all of the Company’s stock-based compensation plans, equity awards to purchase an additional 799,415 shares were authorized for future grants under the plans. The Company issues new shares upon option exercises.

Options granted, exercised, canceled and expired under the stock incentive plan are summarized as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Options outstanding, December 31, 2009		1,167,323		$	9.65	$	6.28
Granted		140,000		$	15.64	$	8.28
Exercised		(313,832	)	$	9.70	$	6.32
Canceled		—			—		—
Options outstanding, December 31, 2010		993,491		$	10.47	$	6.55
Granted		215,000		$	27.84	$	11.46
Exercised		(169,420	)	$	9.75	$	6.33
Canceled		(10,833	)	$	9.64	$	6.28
Options outstanding, December 31, 2011		1,028,238		$	14.23	$	7.61
Granted		—			—		—
Exercised		(172,250	)	$	9.64	$	6.29
Canceled		—			—		—
Options outstanding, December 31, 2012		855,988		$	15.16	$	7.88	$	6,280
Options exercisable, December 31, 2012		693,248		$	12.78			$	6,110
Options unvested, December 31, 2012		162,740		$	25.28			$	170

The aggregate intrinsic value is based on the closing price of $20.70 per share of Digimarc common stock on December 31, 2012, which would have been received by the optionees had all of the options with exercise prices less than $20.70 per share been exercised on that date.

F-25

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The following table summarizes information about stock options outstanding at December 31, 2012:

	Options Outstanding						Options Exercisable
Exercise Price	Number Outstanding		Remaining Contractual Life (Years)		Weighted Average Price		Number Exercisable		Remaining Contractual Life (Years)		Weighted Average Price
$9.64 – $9.91		508,072		5.86	$	9.66		508,072		5.86	$	9.66
$14.99 – $18.01		132,916		7.08	$	15.67		103,126		7.10	$	15.87
$24.35 – $30.01		215,000		8.57	$	27.84		82,050		8.49	$	28.26
$9.64 – $30.01		855,988		6.73	$	15.16		693,248		6.36	$	12.78

Restricted Stock

The Compensation Committee of the Board of Directors awarded restricted stock shares under the Company’s 2008 Plan to certain employees. The shares subject to the restricted stock awards will vest over a certain period, usually four years, following the date of the grant. Specific terms of the restricted stock awards are governed by Restricted Stock Agreements between the Company and the award recipients.

The following table reconciles the unvested balance of restricted stock:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, December 31, 2009		111,000		$	10.02
Granted		124,560		$	16.77
Vested		(34,350	)	$	9.89
Canceled		(3,450	)	$	13.05
Unvested balance, December 31, 2010		197,760		$	14.25
Granted		190,180		$	29.12
Vested		(73,110	)	$	20.82
Canceled		(18,120	)	$	19.24
Unvested balance, December 31, 2011		296,710		$	21.51
Granted		202,340		$	22.51
Vested		(117,667	)	$	22.52
Canceled		(12,300	)	$	22.05
Unvested balance, December 31, 2012		369,083		$	21.72

(13) Defined Contribution Pension Plan

The Company sponsors an employee savings plan (the “Plan”) which qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. The Plan combines both an employee savings plan and company matching plan into one plan under Section 401(k), including a 401(k) Roth option. Employees become eligible to participate in the Plan at the beginning of the month following the employee’s hire date. Employees may contribute up to 75% of their pay to the Plan, subject to the limitations of the Internal Revenue Code. Company matching contributions are mandatory. The previous Plan was terminated as of December 31, 2008.

F-26

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The Company made matching contributions in the aggregate amount as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Matching contributions	$	366	$	349	$	323

(14) Joint Venture and Related Party Transactions

In June 2009, the Company entered into two joint venture agreements with Nielsen to launch two new companies; TVaura LLC (in which Digimarc holds a 51% ownership interest) and TVaura Mobile LLC (in which Digimarc holds a 49% ownership interest). The two joint venture agreements and a revised patent license agreement expanded and replaced the previous license and services agreement between the Company and Nielsen that had been in operation since late 2007. Under the new agreements, the Company and Nielsen agreed to work together to develop new products and services, including the expansion and deployment of those products and services that were in development under the prior agreement.

Under the terms of the patent license agreement, Nielsen agreed to pay Digimarc $18,750 during the period from July 2009 through January 2014, and Digimarc granted to Nielsen a non-exclusive license to Digimarc’s patents for use within Nielsen’s business. Unless earlier terminated in accordance with the agreement, the license will continue until the expiration of the last to expire of the licensed patents. The payment terms extend beyond the Company’s normal 30 to 60 day payment terms, thus the license revenue is being recognized when the installments are due.

The Company provided technical and development services to the joint ventures totaling $6,848 during the period 2009 through 2012. Service revenue was recognized as the services are performed.

The Company and Nielsen each made initial cash contributions aggregating $3,500 payable quarterly from July 2009 through July 2011 to fund TVaura LLC and initial cash contributions aggregating $2,500 payable quarterly from July 2009 through July 2011 to fund TVaura Mobile LLC.

In March 2012, Digimarc and Nielsen decided to reduce the investments in their two joint ventures to minimal levels while assessing alternative approaches to achieving each of their goals in the emerging market opportunity of synchronized second screen television. In connection with this plan for the suspension of operations, the joint ventures accrued estimated expenses for the first quarter’s operations and severance costs for joint venture employees. Digimarc’s share of the one-time severance and suspension costs was approximately $500. Pursuant to the plan of suspending operations of the joint ventures with Nielsen, in April 2012 the Company received $104 of remaining cash from TVaura LLC and contributed $796 to TVaura Mobile LLC to fund both the first quarter’s operating expenses as well as the suspension related costs. Payment of all expenses incurred after the suspension of operations of each joint venture is unconditionally the responsibility of the majority owner, which expenses for TVaura LLC, if any, will be paid by Digimarc. As of December 31, 2012, both Digimarc and Nielsen continued to assess the market opportunities of each of the joint ventures.

The investment in joint ventures account balances have been reduced to $0 as of December 31, 2012.

Pursuant to the terms of the agreements and ASC 810 “Consolidation,” the joint ventures are not consolidated with the Company because the minority member has substantive participating rights, or veto rights, such that no member has majority control.

F-27

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Related Party Transactions

	Year Ended December 31, 2012			Year Ended December 31, 2011		Year Ended December 31, 2010
TVaura LLC:
Capital contributions (return of capital)	$	(104	)	$	1,200	$	1,600
Revenue (1)	$	—		$	2,640	$	2,723
TVaura Mobile LLC:
Capital contributions	$	796		$	900	$	1,200
Revenue (1)	$	272		$	—	$	—
Total:
Capital contributions, net	$	692		$	2,100	$	2,800
Revenue (1)	$	272		$	2,640	$	2,723

(1) Technical and development services

Summarized financial data for TVaura LLC:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Current assets	$	—	$	402	$	777
Noncurrent assets	$	—	$	22	$	31
Current liabilities	$	—	$	169	$	255
Noncurrent liabilities	$	—	$	—	$	—

	Year Ended   December 31,   2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Revenue	$	—		$	—		$	—
Gross profit	$	—		$	—		$	—
Operating expenses	$	52		$	2,699		$	2,825
Net loss from continuing operations	$	(52	)	$	(2,699	)	$	(2,824	)
The Company’s pro-rata share – net loss	$	(27	)	$	(1,376	)	$	(1,440	)
The Company’s gain on investment	$	70		$	—		$	—

Summarized financial data for TVaura Mobile LLC:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Current assets	$	937	$	1,308	$	1,913
Noncurrent assets	$	—	$	—	$	—
Current liabilities	$	957	$	720	$	382
Noncurrent liabilities	$	—	$	—	$	—

F-28

	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Revenue	$	—		$	105		$	—
Gross profit	$	—		$	105		$	—
Operating expenses	$	2,266		$	2,848		$	1,532
Net loss from continuing operations	$	(2,266	)	$	(2,743	)	$	(1,532	)
The Company’s pro-rata share – net loss	$	(1,100	)	$	(1,338	)	$	(740	)
The Company’s loss on investment	$	(50	)	$	—		$	—

(15) Income Taxes

For the year ended December 31, 2012, the provision for income taxes reflects current tax expense, deferred tax expense and withholding tax expense in various foreign jurisdictions. The withholding taxes are computed by the Company’s customers and paid to foreign jurisdictions on the Company’s behalf. The effective tax rate for the year ended December 31, 2012 was 39%. Excess tax benefits associated with stock compensation are being utilized in the current year to offset tax payable and credit additional paid-in capital.

For the year ended December 31, 2011, the provision for income taxes reflects current tax expense, deferred tax benefit and withholding tax expense in various foreign jurisdictions. The effective tax rate for the year ended December 31, 2011 was a tax benefit of 46%. Excess tax benefits associated with stock compensation were being utilized in 2011 to offset tax payable and credit additional paid-in capital. The Company recognized a deferred

F-29

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

tax benefit of $2,581 during the year ended December 31, 2011 as a result of releasing the valuation allowance on deferred tax assets. The Company concluded, based on an analysis of all the facts, including projections of future income, that it was more likely than not that all of its deferred tax assets will be realized.

Components of tax expense (benefit) allocated to continuing operations include the following:

	Year Ended December 31, 2012		Year Ended December 31, 2011			Year Ended December 31, 2010
Current:
Federal	$	4,699	$	1,066		$	—
State		570		3			—
Foreign		1		(20	)		42
Sub-total		5,270		1,049			42
Deferred:
Federal		97		(2,470	)		—
State		27		(365	)		—
Foreign		—		—			—
Sub-total		124		(2,835	)		—
Total tax (benefit) expense	$	5,394	$	(1,786	)	$	42

The reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:

	Year Ended December 31, 2012			%			Year Ended December 31, 2011			%			Year Ended December 31, 2010			%
Income taxes computed at statutory rates	$	4,647			34	%	$	1,316			34	%	$	1,434			34	%
Increases (decreases) resulting from:
State income taxes, net of federal tax benefit		705			5	%		194			5	%		220			5	%
Federal and state research and experimentation credits		(122	)		(1	)%		(784	)		(20	)%		(353	)		—
Change in valuation allowance		12			—			(2,581	)		(67	)%		(1,275	)		(32	)%
Transaction costs		65			1	%		—			—			—			—
Impact of federal graduated rates		39			—			—			—			—			—
Other		48			—			69			2	%		16			—
Total	$	5,394			39	%	$	(1,786	)		(46	)%	$	42			7	%

F-30

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising the Company’s deferred tax assets and deferred tax liabilities are as follows:

	December 31, 2012			December 31, 2011
Deferred tax assets:
Stock based compensation	$	2,636		$	1,976
Federal and state net operating losses		1,900			—
Goodwill		1,146			1,254
Accrued compensation		50			—
Deferred rent		170			190
Federal and state research and experimentation credits		—			458
Other		—			21
Total gross deferred tax assets		5,902			3,899
Less valuation allowance		(184	)		—
Net deferred tax assets	$	5,718		$	3,899
Deferred tax liabilities:
Patent expenditures	$	(1,385	)	$	(1,051	)
Fixed asset differences		(167	)		(13	)
Intangible asset differences		(506	)		(13	)
Other		(18	)		(13	)
Total deferred tax liabilities	$	(2,076	)	$	(1,064	)
Net deferred tax assets	$	3,642		$	2,835

For the year ended December 31, 2012, the Company acquired 100% of the outstanding stock of Attributor Corporation in a non-taxable transaction. Due to Attributor’s history of losses and the inability to utilize Attributor losses to offset the Company’s income for state tax purposes, the Company concluded that it is not more likely than not that the Attributor state deferred tax assets will be realized and a full valuation allowance has been recorded on the state deferred tax assets of Attributor. The valuation allowance recorded as of December 31, 2012 and 2011 is $184 and $0, respectively, and relates to state deferred tax assets acquired as part of the Attributor acquisition.

For the year ended December 31, 2011, the Company determined that it was more likely than not that the net deferred tax assets would be realized and the entire valuation allowance in the amount of $2,581 was released.

As of December 31, 2012, the Company has federal and state net operating loss carry-forwards of $4,873 and $4,873, respectively, which have a carry-forward of 8 – 20 years depending on the jurisdiction. The deferred tax assets, before valuation allowance, for federal and state net operating loss carryforwards acquired in the Attributor acquisition have been reduced to the amount of losses allowed to be utilized in the post-acquisition period before expiration after considering the applicable limitations of IRC Sec. 382. As of December 31, 2012, the Company has federal and state research and experimental tax credits of $49 and $12, respectively, which have a carry-forward of 5 – 19 years depending on the jurisdiction and for which the benefits upon usage will be

F-31

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

recorded in additional paid-in capital from the effects of stock options. As of December 31, 2012, the Company has foreign tax credits of $56 which have a carry-forward of 7 – 9 years and for which the benefits upon usage will be recorded in additional paid-in capital from the effects of stock options.

The Company records accrued interest and penalties associated with uncertain tax positions in income tax expense in the consolidated statements of operations. On initial adoption of ASC 740 and through December 31, 2010, the Company recognized no uncertain tax positions nor accrued interest and penalties associated with uncertain tax positions. For the years ended December 31, 2012 and 2011, the Company recognized uncertain tax positions and no accrued interest and penalties associated with uncertain tax positions. The Company does not anticipate any unrecognized benefits that will significantly increase or decrease within the next 12 months.

A summary reconciliation of the Company’s uncertain tax positions is as follows:

	December 31, 2012		December 31, 2011
Beginning balance	$	102	$	—
Addition for current year tax positions		6		30
Addition for prior year tax positions		—		72
Settlements with taxing authorities		—		—
Lapsing of statutes of limitations		—		—
Ending balance	$	108	$	102

The balance for uncertain tax positions is classified as a long-term liability on the consolidated balance sheet. All uncertain tax positions if reversed would affect the effective tax rate.

The Company is subject to examination in the federal jurisdiction for the tax years ending December 31, 2012, 2011 and 2010 and other state jurisdictions for the tax years ending December 31, 2012, 2011, 2010, 2009 and 2008.

(16) Commitments and Contingencies

Certain of the Company’s product license and services agreements include an indemnification provision for claims from third parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASC 450 “Contingencies.” To date, there have been no claims made under such indemnification provisions.

Our newly acquired subsidiary, Attributor, is a defendant in a patent infringement lawsuit brought by Blue Spike, LLC (E.D. Texas, Civil Action No: 6:12-cv-540). The case was brought against Attributor in August 2012, and was consolidated with other lawsuits brought by Blue Spike into Civil Action No. 6:12-cv-00499.

Blue Spike asserted infringement by Attributor of four patents. Attributor filed an answer denying that it has infringed any valid claim of the patents in suit, and asserting specified defenses, including non-infringement and invalidity.

The court is consolidating cases that Blue Spike brought against over sixty defendants into one case. After that process is complete, a schedule should be set.

Blue Spike has not alleged a specific amount of monetary damages in its Complaint.

F-32

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

The Company is subject from time to time to other legal proceedings and claims arising in the ordinary course of business.

(17) Stock Repurchases

Summary of common stock shares repurchased:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Private transaction		—		552,536		—
Repurchase program		50,900		104,577		—
Exercise of stock options		69,272		48,432		102,077
Tax withholding obligations on stock options		39,005		46,401		81,610
Tax withholding obligations on restricted shares		42,785		24,953		13,506
Total		201,962		766,899		197,193

Value of common stock shares repurchased:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Private transaction	$	—	$	14,927	$	—
Repurchase program		1,201		3,099		—
Exercise of stock options		1,660		1,651		3,037
Tax withholding obligations on stock options		949		1,658		2,435
Tax withholding obligations on restricted shares		950		713		352
Total	$	4,760	$	22,048	$	5,824

On January 26, 2011, the Company repurchased 552,536 shares of its common stock from Koninklijke Philips Electronics, N.V., in a privately negotiated transaction. The shares were purchased for an aggregate price of approximately $14,927, including transaction fees. To facilitate the repurchase, the Company sold $10,752 and $2,996 of short- and long-term marketable securities, respectively, prior to their maturity date at an immaterial gain.

In each of April 2009 and November 2011, the Board of Directors approved a stock repurchase program authorizing the purchase, at the discretion of management, of shares of the Company’s common stock through either periodic open-market or private transactions at then-prevailing market prices. Under the April 2009 program that expired in April 2012, the Company repurchased 223,851 shares at an aggregate purchase price of $4,858. Under the November 2011 program, the Board of Directors approved an additional $5,000. In December 2012, the program was extended through December 31, 2013. As of December 31, 2012, the Company had repurchased 43,293 shares under this program at an aggregate purchase price of $1,002.

As part of the Company’s 2008 Stock Incentive Plan, stock options are granted and restricted stock shares are awarded to certain employees and directors.

Pursuant to the terms of the stock option grants, the Company purchases a number of whole shares of common stock having a fair market value (as determined as of the date of exercise) equal to the amount of the total value of the aggregate exercise price of the options exercised. In addition, the Company withholds

F-33

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

(purchases) from shares issued upon exercise of the stock options a number of whole shares of common stock having a fair market value (as determined by the Company as of the date of vesting) equal to the amount of tax required to be withheld by law, in order to satisfy the tax withholding obligations of the Company in connection with the exercise of such options.

Pursuant to the terms of the restricted stock award agreement, the Company withholds (purchases) from fully vested shares of common stock otherwise deliverable to the employee, a number of whole shares of common stock having a fair market value (as determined as of the date of vesting) equal to the amount of tax required to be withheld by law, in order to satisfy the tax withholding obligations of the Company in connection with the vesting of such shares.

(18) Subsequent Events

On February 20, 2013, the Board of Directors declared a quarterly dividend of $0.11 per share, payable on March 11, 2013 to shareholders of record on March 4, 2013.

(19) Quarterly Financial Information—Unaudited

Quarter ended:	March 31			June 30			September 30			December 31
2012
Service revenue	$	3,048		$	2,609		$	2,616		$	2,519
License and subscription revenue		13,998			6,503			6,287			6,795
Total revenue		17,046			9,112			8,903			9,314
Total cost of revenue		1,810			1,583			1,467			1,648
Gross profit		15,236			7,529			7,436			7,666
Gross profit percent, service revenue		44	%		44	%		48	%		45	%
Gross profit percent, license and subscription revenue		99	%		98	%		98	%		96	%
Gross profit percent, total		89	%		83	%		84	%		82	%
Sales and marketing	$	1,007		$	970		$	937		$	913
Research, development and engineering		1,998			2,146			2,320			2,277
General and administrative		2,758			2,191			2,282			2,226
Intellectual property		319			291			309			329
Operating income		9,154			1,931			1,588			1,921
Net income		4,999			1,216			1,003			1,054
Earnings per common share:
Net income per common share—basic	$	0.74		$	0.17		$	0.14		$	0.15
Net income per common share—diluted	$	0.70		$	0.17		$	0.14		$	0.14
Weighted average common shares outstanding—basic		6,738			6,737			6,761			6,791
Weighted average common shares outstanding—diluted		7,140			6,993			6,984			6,966

F-34

DIGIMARC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands, except share and per share data)

Quarter ended:	March 31			June 30			September 30			December 31
2011
Service revenue	$	3,069		$	3,165		$	3,108		$	3,053
License and subscription revenue		6,022			6,308			5,442			5,872
Total revenue		9,091			9,473			8,550			8,925
Total cost of revenue		1,649			1,690			1,742			1,856
Gross profit		7,442			7,783			6,808			7,069
Gross profit percent, service revenue		48	%		49	%		46	%		42	%
Gross profit percent, license and subscription revenue		99	%		99	%		99	%		99	%
Gross profit percent, total		82	%		82	%		80	%		79	%
Sales and marketing	$	1,102		$	1,017		$	1,166		$	1,051
Research, development and engineering		1,775			1,884			1,958			1,710
General and administrative		2,847			2,270			2,000			2,839
Intellectual property		301			266			259			268
Operating income		1,417			2,346			1,425			1,201
Net income		938			3,626			639			453
Earnings per common share:
Net income per common share—basic	$	0.14		$	0.54		$	0.10		$	0.07
Net income per common share—diluted	$	0.12		$	0.50		$	0.09		$	0.06
Weighted average common shares outstanding—basic		6,864			6,696			6,706			6,699
Weighted average common shares outstanding—diluted		7,505			7,245			7,344			7,279

F-35

EXHIBIT INDEX

The agreements included or incorporated by reference as exhibits to this report may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made for the benefit of the other party or parties to the applicable agreement and:

• were not intended to be treated as categorical statements of fact, but rather as a means of allocating the risk to one of the parties if those statements prove to be inaccurate;

• were qualified by disclosures that were made to the other party or parties in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

• may apply contract standards of “materiality” that are different from “materiality” under the securities laws; and

• were made only as of the date of the applicable agreement or other date or dates that may be specified in the agreement.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Digimarc may be found elsewhere in this Annual Report on Form 10-K and in Digimarc’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

Exhibit Number	Exhibit Description
2.1	Separation Agreement among DMRC Corporation, DMRC LLC, Digimarc Corporation and, with respect to certain sections, L-1 Identity Solutions, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 2 to the Company’s Registration Statement on Form 10, filed with the Commission on August 13, 2008 (File No. 001-34108))†
2.2	Agreement and Plan of Merger dated April 30, 2010 between Digimarc Corporation, a Delaware corporation, and Digimarc Oregon Corporation, an Oregon corporation (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Commission on May 4, 2010 (File No. 001-34108))
2.3	Agreement and Plan of Merger, dated December 3, 2012, by and among Digimarc, DA Sub Inc., a wholly owned subsidiary of Digimarc Corporation, Attributor, and Fortis Advisors LLC, as the representative for Attributor’s security holders (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Commission on December 4, 2012 (File No. 001-34108))†
3.1	Articles of Incorporation of Digimarc Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on May 4, 2010 (File No. 001-34108))
3.2	Bylaws of Digimarc Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on May 4, 2010 (File No. 001-34108))
4.1	Specimen common stock certificate of Digimarc Corporation (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K, filed with the Commission on February 27, 2009 (File No. 001-34108))
4.2	Rights Agreement, dated July 31, 2008, between Digimarc Corporation and Computershare Trust Company, N.A. as Rights Agent (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K, filed with the Commission on February 27, 2009 (File No. 001-34108))
4.3	Form of Certificate of Designation of Series R Preferred Stock (attached as an exhibit to the Rights Agreement filed as Exhibit 4.2 hereto)
4.4	Form of Rights Certificate (attached as an exhibit to the Rights Agreement filed as Exhibit 4.2 hereto)

E-1

Exhibit Number	Exhibit Description
10.1	License Agreement between DMRC Corporation and L-1 Identity Solutions Operating Company (incorporated by reference to Exhibit 10.2 to Amendment No. 4 to the Company’s Registration Statement on Form 10, filed with the Commission on October 2, 2008 (File No. 001-34108))(1)
10.2	Counterfeit Deterrence System Development and License Agreement, dated as of December 6, 2012, between Digimarc Corporation and the Bank for International Settlements (4)
*10.3	Form of Indemnification Agreement between DMRC Corporation and each of its executive officers and directors (incorporated by reference to Exhibit 10.5 to Amendment No. 2 to the Company’s Registration Statement on Form 10, filed with the Commission on August 13, 2008 (File No. 001-34108))
*10.4	Employment Agreement, effective as of November 1, 2011, between Digimarc Corporation and Bruce Davis (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on November 7, 2011 (File No. 001-34108))
*10.5	Digimarc Corporation 2008 Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 24, 2008 (File No. 001-34108))
*10.6	Form of Notice of Stock Option Award and Stock Option Award Agreement under the Digimarc Corporation 2008 Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 24, 2008 (File No. 001-34108))
*10.7	Equity Compensation Program for Nonemployee Directors under the Digimarc Corporation 2008 Incentive Plan (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 24, 2008 (File No. 001-34108))
*10.8	Form of Indemnification Agreement between Digimarc Corporation and each of its executive officers and directors (incorporated by reference to Exhibit 10.1 to Digimarc Corporation’s Annual Report on Form 10-K, as filed by Digimarc Corporation with the Securities and Exchange Commission on March 13, 2006 (File No. 000-28317))
*10.9	Form of Change of Control Retention Agreement entered into by and between Digimarc Corporation and each of Messrs. McConnell, Chamness, Knudson and Meyer (filed as Exhibit 10.9 to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
10.10	Patent License Agreement, dated as of June 11, 2009 between Digimarc Corporation and The Nielsen Company (US), LLC (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on July 31, 2009 (File No. 001-34108))(2)
10.11	Limited Liability Company I Agreement, dated June 11, 2009 between Digimarc Corporation and The Nielsen Company (US), LLC (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on July 31, 2009 (File No. 001-34108))(2)
10.12	Limited Liability Company II Agreement, dated June 11, 2009 between Digimarc Corporation and The Nielsen Company (US), LLC (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on July 31, 2009 (File No. 001-34108))(2)

E-2

Exhibit Number	Exhibit Description
10.13	Lease Agreement, dated March 22, 2004, between Digimarc Corporation and PS Business Parks, L.P., as amended on May 13, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on July 30, 2010 (File No. 001-34108))
10.14	Patent License Agreement, effective as of October 5, 2010, between Digimarc Corporation and IV Digital Multimedia Inventions, LLC (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 3, 2011 (File No. 001-34108)) (3)
10.15	Grant-Back License Agreement, dated October 5, 2010, between Digimarc Corporation and IV Digital Multimedia Inventions, LLC (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 3, 2011 (File No. 001-34108)) (3)
10.16	Patent Rights Agreement, dated October 5, 2010, between Digimarc Corporation and IV Digital Multimedia Inventions, LLC (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 3, 2011 (File No. 001-34108))
10.17	Work Agreement, dated October 5, 2010, by and among Digimarc Corporation, Invention Law Group, P.C. and IV Digital Multimedia Inventions, LLC (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 3, 2011 (File No. 001-34108)) (3)
21.1	List of Affiliates (filed as Exhibit 21.1 to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
23.1	Consent of Independent Registered Public Accounting Firm
23.2	Consent of Independent Registered Public Accounting Firm
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed as Exhibit 31.1 to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed as Exhibit 31.2 to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
31.3	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.4	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer (filed as Exhibit 32.1 to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
32.2	Section 1350 Certification of Chief Financial Officer (filed as Exhibit 32.2 to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
32.3	Section 1350 Certification of Chief Executive Officer
32.4	Section 1350 Certification of Chief Financial Officer
101.INS(a)	XBRL Instance Document (filed as Exhibit 101.INS to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
101.INS(b)	XBRL Instance Document
101.SCH(a)	XBRL Taxonomy Extension Schema Document (filed as Exhibit 101.SCH to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
101.SCH(b)	XBRL Taxonomy Extension Schema Document
101.CAL(a)	XBRL Taxonomy Extension Calculation Linkbase Document (filed as Exhibit 101.CAL to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
101.CAL(b)	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF(a)	XBRL Taxonomy Extension Definition Linkbase Document (filed as Exhibit 101.DEF to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
101.DEF(b)	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB(a)	XBRL Taxonomy Extension Label Linkbase Document (filed as Exhibit 101.LAB to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
101.LAB(b)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE(a)	XBRL Taxonomy Extension Label Linkbase Document (filed as Exhibit 101.PRE to the Company’s Annual Report on Form 10-K, filed with the Commission on February 22, 2013 (File No. 001-34108))
101.PRE(b)	XBRL Taxonomy Extension Label Linkbase Document

E-3

* Management contract or compensatory plan or arrangement.

† Schedules and certain exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Digimarc hereby undertakes to furnish to the Securities and Exchange Commission (the “Commission”) copies of the omitted schedules and exhibits upon request by the Commission.

(1) Confidential treatment has been granted for certain portions omitted from this exhibit pursuant to an order granted by the Commission on October 21, 2008, under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portions of this exhibit have been separately filed with the Securities and Exchange Commission.

(2) Confidential treatment has been granted for certain portions omitted from this exhibit pursuant to an order granted by the Commission on September 10, 2009, under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Confidential portions of this exhibit have been separately filed with the Securities and Exchange Commission.

(3) Confidential treatment has been granted for certain portions omitted from this exhibit pursuant to an order granted by the Commission on March 17, 2011, under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Confidential portions of this exhibit have been separately filed with the Securities and Exchange Commission.

(4) Confidential treatment has been requested for certain portions omitted from this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Confidential portions of this exhibit have been separately filed with the Securities and Exchange Commission.

E-4

EX-10.2

EXHIBIT 10.2

CONFIDENTIAL PORTIONS OMITTED

Counterfeit Deterrence System

Development and License Agreement

Table of Contents:

1.	DEFINITIONS AND PRINCIPLES OF INTERPRETATION	3
2.	SCOPE OF THE SERVICES	11
3.	PROGRAM MANAGEMENT	13
4.	DELIVERABLES	16
5.	RESPONSIBILITIES OF THE CBCDG	17
6.	PRICE AND PAYMENT	18
7.	CHANGE MANAGEMENT	20
8.	INTELLECTUAL PROPERTY MATTERS	22
9.	INTELLECTUAL PROPERTY INDEMNIFICATION	24
10.	REPRESENTATIONS AND WARRANTIES OF DIGIMARC	27
11.	REPRESENTATIONS AND WARRANTIES OF THE BIS	29
12.	CONFIDENTIALITY	30
13.	AUDIT AND INSPECTION	32
14.	DISPUTE RESOLUTION	33
15.	TERM AND TERMINATION	33
16.	FORCE MAJEURE	36
17.	NOTICES	36
18.	MISCELLANEOUS PROVISIONS	37

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

Counterfeit Deterrence System

Development and License Agreement

This Counterfeit Deterrence System Development and License Agreement (the “Agreement”) is made

Between

DIGIMARC CORPORATION, a corporation incorporated under the laws of Oregon and having its head office at 9405 SW Gemini Drive, Beaverton, Oregon, U.S.A. 97008 (“Digimarc”)

and

BANK FOR INTERNATIONAL SETTLEMENTS, created pursuant to The Hague Agreements of January, 1930 having its head office at Centralbahnplatz 2, CH-4051 Basel, Switzerland (“BIS”)

Recitals

WHEREAS:

Effective 1 January 1999, the predecessor to Digimarc (then also known as Digimarc Corporation and subsequently merged into L-1 Identity Solutions Inc. in 2008) and the BIS entered into an agreement entitled the “Counterfeit Deterrence System Development and License Agreement.”

WHEREAS:

On 14 March 2000, 28 December 2001, 1 January 2002 and 1 January 2004, the predecessor to Digimarc and the BIS entered into Amendments to the Counterfeit Deterrence System Development and License Agreement (hereinafter the First, Second, Third and Fourth Amendments). On 18 August 2008, the BIS consented to assignment of the Agreement of 1999 and its amendments to Digimarc.

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CDS DLA 1-January 2013 2 Confidential

WHEREAS:

The parties agreed to restate the Counterfeit Deterrence System Development and License Agreement to include the First, Second, Third and Fourth Amendments into a new agreement and to make additional amendments. The restated and revised agreement was effective from 1 October 2009 (the “2009 Agreement”).

WHEREAS:

The parties wish to renew and extend this Counterfeit Deterrence System Development and License Agreement by entering into this renewal and extension agreement effective 1 January 2013.

WHEREAS:

The parties have agreed that all Services performed prior to 1 January 2013 shall be governed by the previous versions of this Development and License Agreement in effect at the time of those Services.

NOW THEREFORE:

Inconsideration of the promises and covenants set out in the Agreement and other good and valuable considerations, the receipt and adequacy of which are acknowledged by each of the parties, the parties agree as follows:

1. DEFINITIONS AND PRINCIPLES OF INTERPRETATION

1.1 Definitions – Whenever used in this Agreement, the following words and terms shall have the meanings set out below:

“Agreement” means these articles of agreement, including the Schedules, and those documents as specified or referenced in this Agreement as forming part of the Agreement, all as may be amended from time to time;

“Allowable Cost” means a cost of the kind identified in Schedule F;

“Arbitration Agreement” means the agreement attached as Schedule G;

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CDS DLA 1-January 2013 3 Confidential

“BIS Technology” means that technology that the BIS has the right to license, including (a) [**], that the BIS licences to Digimarc on the terms set out in clause 8.1 to use, design or implement the CDS and all Intellectual Property Rights in that licensed [**];

“Business Day” means a day on which both the BIS and Digimarc are open for business at their respective addresses noted above;

“CBCDG” means a committee of representatives from various [**] called “Central Bank Counterfeit Deterrence Group”, previously known as “[**]”;

“CBCDG Contract Authority” means the chairman of the CBCDG Executive Committee;

“CBCDG Project Director” means the project director appointed by the CBCDG Contract Authority from time to time on notice to the Digimarc Contract Authority;

“CBCDG Project Office” means the project office established by the CBCDG Contract Authority, or its staff as the case may be, and that is responsible for the oversight of the overall relationship among the BIS, the CBCDG, the [**] the CDS Technology, and Digimarc and for the key day-to-day contract management;

“CBCDG Task” has the meaning assigned to it by clause 5.1;

“CDS Technology” collectively, means whatever of the BIS Technology, the Digimarc Technology and the Project Technology is incorporated into the CDS;

[**]

“Confidential Information” means information disclosed during the Term of this Agreement in any form which, if disclosed in tangible form, is labelled “Confidential”, “Proprietary” or with a similar legend, or if disclosed orally is information that by its nature would be understood to be confidential to the Discloser;

“Contract Authority” means either the CBCDG or Digimarc Contract Authority, as the context requires;

“Counterfeit Deterrence System” or “CDS” or “System” means a system for [**] that includes [**]. The System incorporates means for [**];

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CDS DLA 1-January 2013 4 Confidential

“Deliverable” means a product, document or tool to be delivered by Digimarc identified in a Statement of Work;

“Dependency” means any of the following dependencies of Digimarc on [**] and their employees, agents, representatives and subcontractors:

(a) performing a task upon which Digimarc’s performance of any part of the Services is dependent;

(b) timely providing to Digimarc the relevant technical information, [**];

(c) timely returning/negotiating [**], documents of understanding as necessary to protect Digimarc or BIS intellectual property;

(d) having attendance of the relevant [**] employees or consultants at key briefings and review meetings; and

(e) such dependencies as are expressly identified in a Statement of Work;

“Device” means any device in which the [**] device;

“[**]” means the [**] of a [**];

“Digimarc Contract Authority” means the individual designated by Digimarc in writing to the CBCDG Contract Authority from time to time;

“Digimarc Project Director” means the Project Director appointed by the Digimarc Contract Authority in accordance with the provisions of clause 3.3;

“Digimarc Technology” means:

(a) the technology partially described in Schedule B developed or owned by Digimarc prior to 1 January 1999 to the extent that it forms part of the CDS;

(b) all Improvements to the technology described in (a) made by or on behalf of Digimarc other than under this Agreement to the extent that they form part of the CDS;

(c) all Improvements to the technology described in (a) made by or on behalf of Digimarc under this Agreement to the extent that they relate to or form part of the CDS; and

(d) all Intellectual Property Rights in all such technology and Improvements;

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CDS DLA 1-January 2013 5 Confidential

“Digital Watermark” refers to [**] (including [**]) that are [**] from [**] by [**] of [**], which [**] of [**] and yet do not significantly [**] from the aesthetics of the [**] or [**] thereby. Examples include:

(a) generally imperceptible changes to [**] or placement in [**];

(b) [**] of a substrate, where the [**] substantially uniform to human touch;

(c) slight localized changes to [**] or [**] of a printed document;

(d) slight changes to [**]; or

(e) [**] of substantially [**];

“Discloser” means a party which has disclosed or otherwise made available its Confidential Information to the other party;

“DLA Labour Costs” means the labour costs defined in Schedule F;

“DLA Labour Rates” means the rates for Services set in accordance with Schedule F;

[**]

“Effective Date” means 1 January 2013;

[**]

“[**] Support Services” means Integration Support, Training and conducting Verification Tests;

“Escrow Agent” means a custodian appointed by the CBCDG Contract Authority;

“Escrowed Materials” means any and all materials deposited or to be deposited by Digimarc with the Escrow Agent under this Agreement including the Improvements pertaining to the CDS Technology which shall include the following:

(a) all Deliverables and work completed by Digimarc (including all [**], [**] and [**] deliverables, supporting documentation, tools and any other product created by Digimarc) in support of delivery of the Services since the last escrow deposit;

(b) details of the deposit including: full name and version details, number of media items, media type and density, file or archive format, list or retrieval commands, archive hardware and operating system details;

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CDS DLA 1-January 2013 6 Confidential

(c) name and functionality of each module or application of the Escrowed Materials;

(d) names and versions of development tools;

(e) documentation describing the procedures for building, compiling, executing and using the software which forms part of the Escrowed Materials (e.g., technical notes, user guides);

(f) hardcopy directory listings and tables of the contents of the computer media, manuals and other materials; and

(g) name and contact details of employee(s) with knowledge of how to maintain and support the Escrowed Materials;

[**]

“Improvement” means any change in the CDS Technology made by or at the direction of Digimarc after 1 January 1999 which enhances, whether by improvement, enhancement, correction, addition or otherwise, the properties, characteristics or manufacture of the CDS and any change to the CDS Technology and/or the [**] made by any [**] in connection with the [**] of the CDS by any [**] that Digimarc has rights in, including customization, improvements, enhancements, corrections, and changes to the [**] so that it can interface properly to a [**];

“Integration Support” means the consulting and programming services to be provided by Digimarc as requested by a [**] to assist the [**] to ensure that the [**] is [**] in a [**];

“Intellectual Property Rights” means all intellectual property rights existing now and in the future including trade secrets, trademarks, copyright, database rights, know-how, topographies, patents and patent applications;

“[**]” means an entity responsible for [**];

“[**]” means the template license agreement with that name agreed upon between the CBCDG and Digimarc, as amended from time to time;

“[**]” means the template license agreement with that name agreed upon between the CBCDG and Digimarc, as amended from time to time;

“Key Personnel” mean those personnel identified in clause 3.5;

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CDS DLA 1-January 2013 7 Confidential

“[**]” means an [**] licensed by Digimarc pursuant to clause 2.2;

“[**]” means an entity that is authorized by a [**] and/or the CBCDG Contract Authority and [**] containing [**] pursuant to clause 2.3;

“[**]” means the template license agreement agreed upon between the CBCDG and Digimarc, as amended from time to time;

“Person” means any individual or other legal entity, including a sole proprietorship, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate, or a natural person in the capacity of trustee, executor, administrator or other legal representative;

“Plan Budget” means the document approved under clause 3.12 defining a minimum spend commitment for a particular calendar year by the CBCDG, subject to clause 3.13;

“Planning Process” means the process for the development of the Statements of Work and Roadmap as agreed to in writing between the CBCDG Project Office and Digimarc;

“Pricing Formula” means the formula defined in Schedule F, clause 9;

“[**]” means the template license agreement with that name agreed upon between the CBCDG and Digimarc, as amended from time to time;

“[**]” means the template license agreement with that name agreed upon between the CBCDG and Digimarc, as amended from time to time;

“Problem Report” means a report of a problem in a format agreed to by the CBCDG Project Director and Digimarc;

“Project Director” means either the CBCDG or Digimarc Project Director, as the context requires;

“Project Technology” means the technology described in Schedule C developed by or on behalf of Digimarc under this Agreement after 1 January 1999, all Improvements to that technology or to the BIS Technology, and all Intellectual Property Rights in that technology and those Improvements;

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CDS DLA 1-January 2013 8 Confidential

“Properly Embedded” when used in reference to a [**] means that the [**] is [**] in accordance with the written instructions provided with the [**] used to [**] and is capable of passing the Verification Test;

“Recipient” means a party to which the Confidential Information of the other party has been disclosed or otherwise made available;

“Roadmap” means the rolling five year project and budget plan agreed to in writing by the CBCDG Contract Authority and Digimarc and updated annually;

“Schedule” means a schedule to this Agreement;

[**]

“Security Requirements” means the requirements for physical security including electronic systems security set out in Schedule D;

“Services” means the services required to be performed by Digimarc as set out in clause 2, and other services reasonably necessary to comply with its obligations under this Agreement;

“SOW Budget” means the amount approved under clause 3.11 defining a minimum spend commitment related to a Statement of Work for a particular calendar year by the CBCDG, subject to clause 3.13;

“Specifications” for the CDS or any part thereof means the technical specifications for the products and tools of the CDS or part thereof to be delivered or already accepted by the CBCDG Project Director under this Agreement;

“Statement of Work” means the document that captures and defines the work activities, deliverables and timeline Digimarc will execute against in performance of specified work developed in accordance with the Planning Process;

“Term” means the period commencing on the Effective Date and ending on 31 December 2024;

“Training” means the training in the use and operation of the [**] described in Schedule E; and

** CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CDS DLA 1-January 2013 9 Confidential

“Verification Test” means a test or tests to determine if [**]. The Verification Test is defined in the Verification Test procedure and is executed using the Verification Test tool.

1.2 Interpretation – in this Agreement:

1.2.1 unless otherwise specified, all references to money amounts are to the currency of the United States of America;

1.2.2 the use of words in the singular or plural, or with a particular gender, shall not limit the scope or exclude the application of any provision of this Agreement to such Person or Persons or circumstances as the context otherwise permits;

1.2.3 whenever a provision of this Agreement requires an acceptance, approval or consent by a party to this Agreement and notice of such acceptance, approval or consent is not delivered within the applicable time, then the party shall be conclusively deemed to have withheld the acceptance, consent or approval;

1.2.4 unless otherwise specified, the number of days within or following which any payment is to be made or act is to be done shall be interpreted to be continuous and shall be calculated by excluding the day on which the period commences and including the day which ends the period and by extending the period to the next Business Day if the last day of the period is not a Business Day;

1.2.5 unless otherwise specified, the order of precedence for interpreting this Agreement shall be:

(a) the terms of this Agreement, excluding Schedules;

(b) the Schedules;

(c) the Statement of Work;

(d) as between the delivery schedules forming part of a Statement of Work, and other provisions for such Statement of Work, the delivery schedules shall take precedence;

1.2.6 for greater certainty, a party or representative to which this Agreement grants the right to make a decision or determination in the sole discretion of the party or representative is not required to act reasonably in making the decision or determination and no such decision or determination may be challenged by the other party under the Arbitration Agreement or otherwise;

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1.2.7 the words “includes” or “including” will be construed as meaning “includes without limitation” and “including without limitation” as the case may be; and

1.2.8 a clause or Schedule, unless the context requires otherwise, is a reference to a clause to, a Schedule of, or a paragraph of a Schedule to, this Agreement, as amended from time to time in accordance with this Agreement.

1.3 Applicable Law – The Agreement and all amendments thereto shall be construed in accordance with the laws of England to the exclusion of its rules of conflicts of laws.

1.4 Schedules – The Schedules to this Agreement, listed below, are an integral part of this Agreement.

Schedule	Description
Schedule A	System Description
Schedule B	Digimarc Technology
Schedule C	Project Technology
Schedule D	Security Requirements
Schedule E	Training
Schedule F	Allowable Costs
Schedule G	Arbitration Agreement

2. SCOPE OF THE SERVICES

2.1 Digimarc shall provide the Services as stated in the Statements of Work.

2.2 Digimarc shall, when requested by the CBCDG Contract Authority, make an irrevocable offer to an [**] to grant the [**] a [**] to the relevant CDS Technology in connection with the banknotes of the [**] on terms no less favourable to the Issuing Authority than those set out in the [**] for CBCDG Members or the [**], as applicable.

2.3 Digimarc shall, when requested by the CBCDG Contract Authority and/or [**]:

(a) make an irrevocable offer to [**] designated by the CBCDG Contract Authority and/or [**] a [**] to the relevant CDS Technology in connection with [**] of a [**], on terms no less favourable to the [**] than those set out in the [**] as applicable; and

(b) deliver the relevant CDS Technology to the [**] referred to above at no charge and provide the Training to the [**] for the charges to the [**] described in clause 2.6 within thirty (30) Business Days after the [**] acceptance of the offer to [**], or at such other times as may be agreed between Digimarc and the [**].

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2.4 No later than sixty (60) Business Days after every written request made by a [**] during the Term, Digimarc shall provide Integration Support to the [**] on a date or dates agreed between Digimarc and the [**] for the charges described in clause 2.6.

2.5 No later than twenty (20) Business Day after every written request made by a [**] during the Term, Digimarc shall conduct Verification Tests of [**] on a date or dates agreed between Digimarc and the [**], as the case may be, for the charges specific in clause 2.6.

2.6 The amount charged by Digimarc to the [**] for [**] Support Services will be in accordance with the Allowable Costs.

2.7 Digimarc shall continue to provide support to [**] for the two (2) most recently released versions of the [**] unless the CBCDG Project Director instructs otherwise.

2.8 Digimarc [**] the relevant CDS Technology to all [**] at the request of the CBCDG Project Director on terms no less favourable to the [**] than those set out in the [**].

2.9 Digimarc shall continue to support all deployed versions of the [**] and [**] as instructed by the CBCDG Project Director.

2.10 The BIS hereby grants Digimarc a [**] the BIS may have or acquire under clause 8.2 of the Agreement.

2.11 Digimarc shall be responsible for compliance with laws and regulations governing export from the United States. As between Digimarc and the CBCDG Contract Authority, the CBCDG Contract Authority shall be responsible for advising those using the CDS on compliance with laws and regulations governing export from their countries and on compliance with United States law concerning re-export. Upon request from the CBCDG Project Director, Digimarc shall provide assistance to support the CBCDG Project Director advising such users of the CDS on compliance with laws and regulations governing export from their countries and on compliance with United States law concerning re-export. Costs that Digimarc incurs in compliance with this clause 2.11 are an Allowable Cost.

[**]     

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2.12 Digimarc acknowledges and confirms the BIS’ right to enforce clauses 2.2, 2.3 and 2.8 by an application for specific performance or otherwise.

2.13 Digimarc shall at all times comply, and shall ensure that its employees, agents and subcontractors comply, with the Security Requirements.

2.14 The CBCDG Project Office and Digimarc shall develop a plan that establishes a procedure which, upon notice of termination of this Agreement, facilitates the orderly winding down of the Services or the orderly, effective and efficient transition of the operational capability, knowledge of the Services and the responsibility for the provision of the Services, from Digimarc to an alternate supplier (“Termination Assistance Plan” or “TAP”). The TAP shall be reviewed annually and updated as required. The CBCDG Contract Authority agrees to pay for such assistance as provided under the TAP.

3. PROGRAM MANAGEMENT

3.1 The BIS designates the CBCDG Contract Authority, the CBCDG Project Director and the CBCDG Project Office as its agents to carry out the responsibilities designated to each of them respectively throughout this Agreement. They shall each have only the powers specified in the respective provisions of this Agreement. The BIS hereby agrees to procure the performance of any obligations that are expressed to be performed by any of the CBCDG, the CBCDG Contract Authority, the CBCDG Project Director or the CBCDG Project Office.

3.2 The CBCDG Project Director shall be responsible for coordinating fulfillment by the BIS of its obligations under this Agreement and directing Digimarc in respect of prioritizing effort and timing of Services in relation to any [**] and/or [**] in accordance with the agreed upon Statement of Work and changes thereto. Except as expressly set out in this Agreement, the CBCDG Project Director shall have no authority to amend this Agreement, approve payments or approve or accept Deliverables or other Services or proposals on behalf of the BIS.

3.3 Digimarc shall designate a responsible individual with adequate authority and competence as the Digimarc Project Director. The Digimarc Project Director shall be responsible for coordinating the performance of the Services by Digimarc including serving as project leader and primary interface with the CBCDG, but shall have no authority to agree to an amendment of this Agreement on behalf of Digimarc.

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3.4 The respective Project Directors or Contract Authorities may from time to time appoint one or more persons to represent him or her on prior written notice to the other Project Director or Contract Authority.

3.5 The CBCDG Project Director and Digimarc Project Director shall agree on the list of Key Personnel whose knowledge and skill set make them critical to the delivery of the Services. The list of Key Personnel shall be sent to the CBCDG Contract Authority annually by 31 December. If it becomes necessary for Digimarc to provide substitute or add Key Personnel for any reason, the CBCDG Contract Authority must approve such Key Personnel in advance, which approval shall not be unreasonably withheld. Digimarc shall, at Digimarc’s cost, train the replacement Key Personnel about the job specifics so the replacement personnel shall be able to perform the Services of the replaced Key Personnel at the particular state the Services had reached when the personnel change occurred.

3.6 Digimarc shall replace within a reasonable time under the circumstances any of its employees or authorized subcontractors engaged in fulfilling its obligations under this Agreement, including its Project Director, whose removal is required by the CBCDG Contract Authority, provided that the CBCDG Contract Authority specifies reasonable cause for such removal in writing.

3.7 Digimarc undertakes that all personnel assigned to perform the Services shall be employees or a non-material subcontractor of Digimarc. Digimarc shall provide reasonable prior written notice of its intent to use a material subcontractor. The CBCDG Project Director shall have the right to approve all material subcontractors, which approval shall not be unreasonably withheld. Digimarc undertakes that it shall obtain from each subcontractor prior to permitting that subcontractor to do any part of the Services a written undertaking that all Intellectual Property Rights in any work developed by that subcontractor while providing the Services shall vest absolutely in Digimarc upon the date of creation. Digimarc shall remain responsible for any obligations which are performed by a subcontractor and for the conduct of subcontractors as if they were the acts or omissions of Digimarc.

3.8 Digimarc shall report on progress of the Services in the format and with the frequency directed in writing by the CBCDG Contract Authority. Digimarc will attend such review meetings as requested by the CBCDG Project Director. There will be at least six (6) such review meetings per year or as otherwise agreed by the parties to review technical, planning and resource matters. Each such meeting will last no more than two (2) days

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unless otherwise agreed upon in advance and will be held at a mutually agreeable date and location. At least half of the review meetings will be held at Digimarc. Digimarc will also provide a presentation for the CBCDG [**] on development and [**] progress at least once per year if requested by the CBCDG Project Director.

3.9 In the event that it becomes evident to a Project Director that a failure or delay to perform in accordance with a party’s obligations under this Agreement will result in a material impact on the completion of the Services in accordance with the applicable Statement of Work, then the relevant Project Director shall immediately bring the issue to the attention of the other Project Director.

3.10 As of the Effective Date, the CBCDG Contract Authority shall have approved the 2013 Statement of Work and the 2014 Plan Budget.

3.11 The Statement of Work and associated SOW Budget for the next calendar year (starting with 2014) shall be prepared by Digimarc in collaboration with the CBCDG Project Director and provided to the CBCDG no later than 31 May of each year or such later date as agreed between the CBCDG Project Director and Digimarc. The CBCDG Contract Authority shall, by 30 June of each year or such later date as agreed between the CBCDG Project Director and Digimarc, notify Digimarc in writing of the CBCDG’s approval of the Statement of Work and associated SOW Budget for the next calendar year.

3.12 The Plan Budget for the calendar year following the next calendar year (starting with 2015) shall be prepared by Digimarc in collaboration with the CBCDG Project Director and provided to the CBCDG no later than 31 May of each year or such later date as agreed between the CBCDG Project Director and Digimarc. The CBCDG Contract Authority shall, by 30 June of each year or such later date as agreed between the CBCDG Project Director and Digimarc, notify Digimarc in writing of the CBCDG’s approval of such Plan Budget for the calendar year following the next calendar year. The Plan Budget for any given calendar year shall be the basis for creating the SOW Budget for that same calendar year.

3.13 If Digimarc is ready, willing and able to provide the Services at the level of such SOW Budget amounts and such Plan Budget amounts and is not otherwise in material breach of this Agreement, the CBCDG Contract Authority shall pay Digimarc at least such SOW Budget amounts and such Plan Budget amounts for the relevant years. In the event of any termination of the Agreement, the terms of clause 15 shall take precedence over this clause.

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3.14 The total value of the Services set out in the Statement of Work for any given year must be greater or equal to the initial approved Plan Budget for that year.

3.15 The CBCDG Project Office and Digimarc shall hold planning meetings in accordance with the Planning Process as needed to review the scope and status of current and planned projects under the Statement of Work and Roadmap relative to the schedule, expenditures and budgets and to establish Statements of Work for subsequent periods.

3.16 The CBCDG Project Office and Digimarc shall meet at least once in each calendar year to discuss [**] and similar issues related to the development, [**] and [**] of the CDS. If both parties agree that this meeting is not required in any given year, the meeting will not be held.

4. DELIVERABLES

4.1 Deliverables shall be approved by the CBCDG Contract Authority in accordance with the timing and criteria set out in the relevant Statement of Work.

4.2 Where a Deliverable depends upon acceptance and Digimarc fails to produce a Deliverable acceptable to the CBCDG Contract Authority in accordance with the acceptance criteria set out in the applicable Statement of Work then the CBCDG Contract Authority may, in its sole discretion, by written notice to Digimarc, either:

(a) allow additional time for Digimarc to produce a Deliverable acceptable to the CBCDG Contract Authority, whereupon the time for completion of all other Deliverables which depend on the acceptance shall automatically be extended by one day for each additional day or such other period as may be agreed in writing between the respective Contract Authorities; or

(b) cancel any further work on the Deliverable and all Deliverables which depend on the acceptance, whereupon the Statement of Work which provides for the cancelled work or Deliverables which depend on the acceptance shall be deemed to be amended to exclude them.

4.3 Digimarc shall not be responsible to the extent any failure by Digimarc to perform the Services in accordance with this Agreement is directly attributable to: a) a delay to perform any CBCDG Task applicable to the affected part of the Services; b) a Dependency applicable to the affected part of the Services not being fulfilled by a [**]; or c) a force majeure event (as defined in clause 16.1).

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4.4 If any version of the [**] fails to meet the Specifications for that version within one (1) year of the date of acceptance thereof by the CBCDG Contract Authority, and such failure could not have been discovered by the CBCDG Contract Authority using reasonable diligence during the acceptance procedure for that version, then Digimarc shall, at its own expense, within sixty (60) days after receipt of a Problem Report from the CBCDG Project Director or such other period as the CBCDG Project Director may agree, rectify the failure and at the direction of the CBCDG Project Director provide a corrected [**] to which Digimarc had previously provided the [**].

4.5 If any version of a [**] provided by Digimarc to any Person during the Term for incorporation into any Device, fails to meet the relevant Specifications within one (1) year of the date of acceptance thereof by the CBCDG Contract Authority, and such failure could not have been discovered by the CBCDG Contract Authority using reasonable diligence during the acceptance procedure for that version, then Digimarc shall, at its own expense, within sixty (60) days after receipt of written notice of a Problem Report from the CBCDG Project Director or such other period as the CBCDG Project Director may agree, rectify the failure and at the direction of the CBCDG Project Director provide [**] to all Persons to which Digimarc had previously provided such a [**].

5. RESPONSIBILITIES OF THE CBCDG

5.1 The CBCDG Project Director shall ensure that the CBCDG performs all tasks assigned to it in a Statement of Work by the dates set out therein (herein referred to as the CBCDG Tasks) provided that Digimarc has provided the CBCDG Project Director with reasonable notice that there is a Digimarc action that is dependent on that CBCDG Task.

5.2 Unless otherwise expressly set out in this Agreement, the CBCDG Contract Authority or the CBCDG Project Director shall respond in writing within ten (10) Business Days to every written request for consent required by this Agreement received from Digimarc.

5.3 If there is a delay in complying with any of the obligations under clauses 5.1 or 5.2 for any reason not attributable to Digimarc, and such delay will cause a delay in the completion and delivery by Digimarc of any Services, then Digimarc shall reasonably promptly advise the CBCDG Project Director of the impact of the delay. The time for completion of the Services and all subsequent Services dependent thereon, shall then be extended automatically by one day for each day of delay or such other period as may be agreed in writing between the respective Contract Authorities. If Digimarc suffers

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increased costs by reason of such delay, other than a delay due to a force majeure event (as defined in clause 16.1), such costs reasonably and necessarily incurred by Digimarc shall be borne by the CBCDG Contract Authority. Digimarc shall make every reasonable effort to reassign staff and otherwise mitigate the increased costs associated with such a delay. If the delay is due to a force majeure event, such costs shall be borne equally by the CBCDG Contract Authority and Digimarc. If there are any additional costs to be borne by the CBCDG Contract Authority otherwise than as agreed under clause 6 of this Agreement, Digimarc shall reasonably promptly notify the CBCDG Contract Authority of such and the CBCDG Contract Authority shall either approve such costs and/or request a change to the Services under clause 7 of this Agreement. Such change request shall ask Digimarc to describe the effect the costs and delay under this clause 5.3 will have on the applicable Statements of Work. If after Digimarc describes the effect the costs and delay under this clause 5.3 will have on the applicable Statements of Work, the CBCDG Contract Authority requests such a change, the Statements of Work shall be amended so that Digimarc remains within the previously approved SOW Budget. This clause 5.3 sets forth Digimarc’s only remedy for a delay by the CBCDG in complying with any such obligation.

6. PRICE AND PAYMENT

6.1 The BIS designates the CBCDG Contract Authority as its agent to make all payments owed by the BIS under or in connection with this Agreement. Digimarc shall notify the BIS if any payment is not received within thirty (30) days of when such payment is due.

6.2 Subject to the limits set out in this Agreement and unless otherwise expressly set out herein, the CBCDG Contract Authority shall reimburse Digimarc for all the Allowable Costs reasonably and properly incurred by Digimarc during each calendar month to perform the Services. Digimarc shall send its invoice to the CBCDG Contract Authority monthly in arrears for such Allowable Costs. Each invoice shall specify the Expenses (as defined in Schedule F) incurred and the time spent by the staff and sub-contractors of Digimarc in performing the Services and shall give a breakdown of the Allowable Costs.

6.3 The CBCDG Contract Authority shall pay Digimarc each amount which is owed Digimarc under this Agreement no later than thirty (30) days after the later of the payment due date and the date on which the CBCDG Contract Authority receives a detailed and correct invoice for the amount.

6.4 For a period of five (5) years following their creation, Digimarc shall maintain proper, up-to-date, accurate and complete books, records and other documentation substantiating

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the Allowable Costs invoiced under this Agreement including time sheets showing the hours spent on each task which forms part of the Services and receipts for all Expenses. Digimarc shall produce such books, records and documentation to the CBCDG Project Office or its representatives for inspection and copying at Digimarc’s premises (with the right to take such copies from Digimarc’s premises as long as Digimarc is notified in writing what copies are removed from Digimarc’s premises and the copies are handled by the CBCDG Project Office or its representative in accordance with the confidentiality obligations under clause 12) at all reasonable times on request by the CBCDG Project Director.

6.5 Except as otherwise expressly provided in this Agreement, the CBCDG Contract Authority shall pay Digimarc all sales, use, goods and services or other similar taxes levied by any government in the [**] which Digimarc is obliged to collect and remit to such government(s) in connection with any amount paid under this Agreement.

6.6 Digimarc is responsible for, and shall indemnify the BIS against, and hold the BIS harmless from, the payment of all taxes levied by any government on or in respect of Digimarc’s income and any amounts required by law to be paid in respect of social benefits for Digimarc’s employees relating to or arising out of the performance of the Services by Digimarc. If required by law, the BIS shall deduct all such taxes and amounts from the amounts otherwise payable to Digimarc and remit them to the appropriate authorities.

6.7 The BIS may set off against any amount which the BIS owes Digimarc under or in connection with this Agreement any amount which Digimarc owes the BIS under or in connection with this Agreement including damages for breach.

6.8 Any equipment or software [**] purchased for over [**] as an Allowable Cost shall be owned by the BIS or another entity designated by the CBCDG Contract Authority and shall be held in trust by Digimarc. Digimarc shall ensure that the BIS or the designated entity is identified on such [**] and [**] as the owner. Unless such [**] or [**] needs to be used in a manner that it was not designed for and the CBCDG Contract Authority is made aware of such need, Digimarc shall, at its own risk, use such [**] or [**] in a reasonably careful and proper manner and in accordance with all operating instructions. In any event such [**] and [**] shall be used by Digimarc solely for the provision of the Services. Upon termination of this Agreement and at the request of the CBCDG’s Project Director, Digimarc shall promptly deliver such [**] and [**] to the CBCDG Project Office at the CBCDG’s expense. Such [**] and [**] shall be returned in the same condition as originally received by Digimarc, reasonable wear and tear excepted.

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If, however, the [**] or [**] needs to be used in a manner that it was not designed for and the CBCDG Project Director is made aware of such need, then such [**] and [**] shall be returned “as is.” The CBCDG Contract Authority shall reimburse Digimarc for any unrecovered costs of such [**] or [**] (i.e. costs not recovered through depreciation charges), subject to receipt of a correct and properly due invoice.

6.9 DLA Labour Rates as set out and adjusted in accordance with Schedule F shall be no greater than the then-current rates charged to Digimarc’s most favored customers, [**].

6.10 If an approved Plan Budget for any calendar year is at least [**]), but does not amount to at least [**]),

(a) Digimarc can start a review of the DLA Labour Rates for all DLA labour positions set out in Schedule F according to the agreed upon Pricing Formula. The review will be completed within three months of the day Digimarc gives the CBCDG notice that it is initiating a review under Schedule F. Any adjustment to the DLA Labour Rates under this review will be effective on the January 1 of the year that the lower Plan Budget would be effective. The DLA Labour Rates for that same January 1 date shall also be adjusted in accordance with the indexation formula of clause 7 of Schedule F; and

(b) The CBCDG Contract Authority shall pay Digimarc all of its actual and reasonable costs incurred in connection with the reduced Plan Budget including:

(i) third party contract termination costs;

(ii) employee re-deployment or termination costs including severance, outplacement, benefits, acceleration of stock compensation, employer paid payroll taxes; and

(iii) accounting, legal and travel costs associated with the reduced Plan Budget and related negotiations.

Digimarc shall use commercially reasonable efforts to mitigate all such costs.

7. CHANGE MANAGEMENT

7.1 The CBCDG Project Director or Digimarc may request a change to the Statements of Work from time to time by submitting a request in writing to the other party’s Project Director. Any such request shall indicate the nature of the new work to be performed in a form sufficient for Digimarc to investigate the effect of the change.

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7.2 On making such a change request or within ten (10) Business Days after receiving a change request from the CBCDG Project Director, Digimarc shall inform the CBCDG Project Director of the amount, if any, which Digimarc intends to invoice to investigate the effect the change will have on the applicable Statements of Work and the Allowable Costs for the applicable Statements of Work.

7.3 Within ten (10) Business Days after receiving the written authorization of the CBCDG Project Director to conduct the investigation of a change, or such longer period as may be authorized by the CBCDG Project Director, Digimarc shall report to the CBCDG Project Director, in writing, on the results of the investigation.

7.4 Within ten (10) Business Days after the CBCDG Project Director receives the report and, if the change will not increase the approved SOW Budget for a given year as set out in the approved Statements of Work, then the CBCDG Project Director shall notify Digimarc whether or not the change is authorized. If the change will increase the approved SOW Budget for a given year as set out in the approved Statements of Work, then the CBCDG Contract Authority must notify Digimarc whether or not the change is authorized.

7.5 The Statements of Work shall be updated quarterly to reflect all authorized changes to properly state the new obligations of Digimarc. If both parties agree that an update to the Statement of Work is not required for any given quarter, none shall be provided.

7.6 Digimarc shall not implement any change to the Services until the change is authorized in writing by the CBCDG Project Director or the CBCDG Contract Authority, as set out in clause 7.4. Digimarc shall implement any change directed and authorized pursuant to clause 7.4 provided:

(a) the change is technically feasible and is within the capabilities of Digimarc;

(b) the costs associated with such change identified by Digimarc in its investigative report and approved under clause 7.4 as part of the approval of the change are borne by the CBCDG Contract Authority; and

(c) Digimarc is given commensurate relief in the manner and to the extent as specified in the authorized change from prior commitments under the Statements of Work.

7.7 Pending receipt of a written authorization from the CBCDG Project Director or the CBCDG Contract Authority, Digimarc shall proceed with the Services in accordance with the approved Statements of Work.

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8. INTELLECTUAL PROPERTY MATTERS

8.1 The BIS grants to Digimarc a non-exclusive, royalty-free, worldwide license to use (including the right to reproduce, amend, modify, adapt, distribute and translate) and sublicense such BIS Technology which is incorporated into the CDS or needed by Digimarc in order to comply with its obligations under this Agreement and to sublicense the same in any license agreement entered into by Digimarc as directed or permitted by the CBCDG Contract Authority under this Agreement and for no other purpose.

8.2 The BIS and Digimarc agree to renew and extend the [**] to the BIS as set out at clauses 8.4-8.11 of the 2009 Agreement, in the manner set out in this clause 8. Accordingly, Digimarc hereby renews and extends the [**] to the BIS of the [**] the Digimarc Technology and the Project Technology, and all Improvements thereto, and [**] of the Digimarc Technology and the Project Technology and such Improvements to other Persons, for the purposes of:

(a) [**], the [**] and any such component thereof, and making the [**] and any component available to others; and

(b) [**];

[**].

The [**] to the BIS and renewed and extended by this clause 8.2 applies to Digimarc Technology and the Project Technology and all Improvements existing on or before the effective date of this Agreement and created on an on-going basis under any subsequent Statements of Work approved under this Agreement. [**]

[**], including [**]. For greater certainty, the uses permitted by the license are limited to [**].

The [**] to the BIS does not permit any other uses, [**].

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8.3 The [**] to the BIS and described in clause 8.2 has effect in respect of each specific item of Digimarc Technology, Project Technology or Improvements created as set out in clause 8.2 on the earliest of:

(a) the date on which the CBCDG Contract Authority pays Digimarc all sums properly due to Digimarc under this Agreement for the development of that specific item;

(b) sixty (60) days following the effective date of termination of this Agreement in accordance with the provisions of clause 15.2(a), (b), (d) or (e) unless Digimarc demonstrates within such sixty (60) day period that, notwithstanding the occurrence of the events giving rise to the termination, Digimarc is willing and able to comply with its obligations under the Agreement; or

(c) the effective date of termination of this Agreement in accordance with the provisions of clauses 15.2(c), 15.2(f), 15.2(g), 15.3, 15.5 or 15.9.

8.4 Nothing in this Agreement shall be construed to grant or create any broader license rights than those expressly granted by this Agreement.

8.5 From time to time during the Term, on no less than thirty (30) Business Days prior written notice by the CBCDG Project Director, Digimarc shall, at Digimarc’s premises, present representatives of the Escrow Agent with all the Escrowed Materials, in any form, in Digimarc’s possession or control. The representatives may identify any or all of such material and Digimarc shall arrange, at the expense of the BIS, for a complete, accurate and up-to-date copy of the selected material to be made and sent to the Escrow Agent within five (5) Business Days of the selection being made for deposit. All work to prepare and deliver the Escrow Materials to the Escrow Agent will be Allowable Costs.

8.6 The CBCDG Contract Authority shall inform Digimarc within thirty (30) days after the end of each calendar quarter during the Term of all improvements relating to (i) [**]; (ii) [**]; (iii) [**]; and (iv) any other part of the CDS, [**] the CBCDG [**], or caused or permitted to be made, as a result of access to and use of the Escrowed Materials or the Digimarc Confidential Information. The CBCDG Contract Authority shall provide to Digimarc within a reasonable period of time following request, the information for those improvements requested by Digimarc in writing.

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8.7 The BIS hereby grants to Digimarc a royalty-free, non-exclusive, non-transferable, worldwide license to use and license the improvements described in clause 8.6 and in any patents thereon owned or otherwise licensable by the BIS.

8.8 For greater certainty, the obligations set out in clauses 8.6 and 8.7 shall not apply to any improvement which the CBCDG Contract Authority can demonstrate would have been made irrespective of access to the Escrowed Materials or Digimarc Confidential Information.

8.9 The CBCDG Contract Authority shall take all reasonable steps to ensure that Persons to whom it allows access to the Escrowed Materials will be contractually bound in accordance with terms substantially like those set forth in clauses 8.6, 8.7 and 8.8, granting rights in favour of Digimarc.

8.10 On the date on which the grant of the license to the BIS (as set out in clause 8.2) takes effect in respect of a specific item of Digimarc Technology, Project Technology or Improvements, the CBCDG [**], copy and use the Escrowed Materials relating to such item.

9. INTELLECTUAL PROPERTY INDEMNIFICATION

9.1       (a) The BIS shall provide Digimarc with prompt written notice of any claim, demand or action against the BIS based on an allegation that the CDS, the Digimarc Technology or the Project Technology or any Improvements thereto or any part thereof, infringes any Intellectual Property Right of any Person (referred to below as a “Claim”).

(b) Upon such notice, Digimarc shall at its own expense resolve any Claim, including settlements or litigation proceedings, and pay all costs associated with the resolution of such Claim.

(c) Any counsel hired to assist in the resolution of such Claim shall be selected by mutual agreement between the BIS and Digimarc.

(d) Digimarc shall consult and work in cooperation with the BIS in connection with the resolution of any Claim, taking into account the BIS’ special status as an international organization.

(e) The BIS shall comply with all reasonable requests for assistance from Digimarc in connection with the settlement or defense of any Claim.

9.2 Notwithstanding any other provision of this Agreement to the contrary but subject to these clauses 9.1-9.3 (including the notice in clause 9.1(a)), Digimarc shall indemnify the

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BIS against and save the BIS harmless from all loss, costs, liabilities including, for greater certainty an award of damages, and expenses and reasonable legal fees, arising from each Claim. The obligation set out in these clauses 9.1-9.3 shall not apply in respect of any settlement made by the BIS without the consent of Digimarc.

9.3 If the CDS, the Digimarc Technology or the Project Technology, or any Improvement thereto or part thereof is held to infringe, or if Digimarc believes that it is likely to be held to infringe, any of the Intellectual Property Rights described in clause 9.1, Digimarc shall, in addition to its other obligations set out above, at its own expense either:

(a) procure for the BIS the right to continue using the allegedly infringing materials; or

(b) replace or modify the materials to the reasonable satisfaction of the BIS so that the materials are no longer infringing but remain functionally equivalent.

Failing either of which result the BIS may, at its option, terminate this Agreement without prejudice to the BIS’ other rights and remedies available in law, at equity or otherwise.

9.4 Digimarc shall provide the BIS with prompt written notice of any claim, demand or action against Digimarc based on an allegation that the BIS Technology or any part thereof, infringes any Intellectual Property Right of any person (referred to below as a “BIS Technology Claim”). Digimarc shall comply with all reasonable requests for assistance from the BIS in connection with the settlement or defense of any BIS Technology Claim.

9.5 Notwithstanding any other provision of this Agreement to the contrary, the BIS shall indemnify Digimarc against and save Digimarc harmless from all loss, costs, liabilities including, for greater certainty an award of damages, and expenses and reasonable legal fees, arising from each BIS Technology Claim. The obligation set out in this clause 9.5 shall not apply in respect of any settlement made by Digimarc without the consent of the BIS.

9.6 If the BIS Technology or any part thereof is held to infringe, or if the BIS believes that it is likely to be held to infringe, any of the Intellectual Property Rights described in clause 9.4, the BIS may, in addition to its other obligations set out above, at its own expense either:

(a) procure for Digimarc the right to continue using the allegedly infringing materials; or

(b) replace or modify the materials to the reasonable satisfaction of Digimarc so that the materials are no longer infringing but remain functionally equivalent.

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9.7 Digimarc hereby undertakes to assume and be responsible for the provision of intellectual property (IP) infringement indemnification in respect of any infringement or alleged infringement of any third party IP rights of any kind (“IP Indemnification”) arising in respect of [**] that Digimarc [**] after 10 January [**] (“[**]”). [**]: (a) Digimarc has the right to direct the defense of any infringement and indemnity claim; (b) the [**] shall take such actions as are reasonably requested by Digimarc in connection with managing, defending, and settling any claim or demand, including mitigation of damages; (c) to facilitate mitigation or avoid infringement, Digimarc can supply, at its own cost, to the [**] with the CBCDG Contract Authority’s prior approval which shall not be unreasonably withheld; and (d) if the [**] the CBCDG Contract Authority [**] as of the date of the notice.

9.8 Unless otherwise agreed between Digimarc and the CBCDG Project Director, [**]. Digimarc and the CBCDG Project Director shall mutually agree on a [**], such agreement not to be unreasonably withheld.

9.9 Subject to clause 9.12(c), the [**]. [**], Digimarc shall provide indemnification [**] in accordance with its obligations under this Agreement, [**] provided that the IP Indemnification is not terminated or that the Agreement is not terminated or otherwise expires.

9.10 In addition to any other BIS [**] obligations in this Agreement and in consideration of Digimarc’s continuing compliance at all times with its obligations under clauses 9.7-9.12, the CBCDG Contract Authority shall [**] Digimarc for the IP Indemnification an[**]. [**].

9.11 [**] is not included under the provisions of clauses 9.7-9.12.

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9.12     (a) The BIS has the option, at its sole discretion, to terminate the IP Indemnification obligations of Digimarc under clauses 9.7-9.12:

(i) at the end of a calendar year and discontinue the [**] under clause 9.10 as of the end of that same calendar year with written notice by 15 November of that same calendar year; or

(ii) immediately on written notice if this Agreement is terminated pursuant to clauses 15.2, 15.3 or 15.5.

(b) Digimarc has the option to terminate the indemnification obligations of Digimarc under clauses 9.7-9.12 if [**] under clause 9.10 and [**] is not made within thirty (30) days of receipt of an IP Indemnification termination notice from Digimarc.

(c) Upon termination of this IP Indemnification under clauses 9.12(a) or 9.12(b) or termination of the Agreement for any reason, Digimarc shall [**] from and the CBCDG Contract Authority shall arrange for [**] except that if a [**] before such termination and Digimarc [**] within thirty (30) days of such termination, Digimarc shall [**], in accordance with clauses 9.7-9.12, [**].

10. REPRESENTATIONS AND WARRANTIES OF DIGIMARC

10.1 Digimarc represents, warrants and undertakes to the BIS that from and after the Effective Date:

(a) the Services shall be of professional quality conforming to generally accepted [**] practices and shall be performed at all times in a timely and cost effective manner and, for greater certainty Digimarc shall employ the standard of care in performing the work that would be expected of an [**] of the same or similar type as the [**] which comprises the CDS Technology and in the case of other Services, in a manner that would be expected of a competent and experienced provider of the same or similar type of Services;

(b) Digimarc shall ensure that its personnel are appropriately qualified, skilled, trained and experienced to undertake the Services and tasks assigned to them, and that each of its personnel shall possess the qualifications and experience which Digimarc has represented them to possess;

(c) Digimarc is duly incorporated and organized and is validly subsisting under the laws of the State of Oregon, U.S.A. or some other state in the United States with full corporate power and authority to enter into this Agreement;

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(d) to the best of its knowledge, neither this Agreement nor the Services will contravene, breach, or result in any default under any agreement, permit, by-law, or law or regulation to which Digimarc is subject or by which it is bound including, for greater certainty, any laws or regulations in effect in the United States governing export;

(e) this Agreement when executed and delivered by Digimarc shall constitute a valid and binding agreement with Digimarc enforceable against Digimarc according to its terms;

(f) Digimarc owns all rights in and to, or is properly licensed in respect of, the Digimarc Technology and the Project Technology;

(g) Digimarc shall at all material times have the right to grant the licenses to the Digimarc Technology, the Project Technology and the Improvements thereon as required by this Agreement; and

(h) for greater certainty, with the exception of the [**], neither the Project Technology, the Digimarc Technology or Improvements thereon infringe any Intellectual Property Right of any Person.

10.2 Digimarc represents, warrants and undertakes to the BIS that:

(a) incorporated as part of its [**] practices and procedures are those measures and security procedures commercially and reasonably available on the date for delivery of a component of the CDS [**] in the CDS that could interfere with the use of the CDS or corrupt, interfere with or damage any data;

(b) the CDS shall contain no lock, clock, timer, counter, copy protection feature, replication device or intentional defects (including “viruses” or “worms” as such terms are commonly used in the computer industry), CPU serial number reference, or other device which might:

(i) lock, disable or erase the CDS or any data which is loaded on the CDS so as to prevent full use of the CDS by authorized Persons; or

(ii) require action or intervention by Digimarc or any other Person to allow properly trained and authorized Persons to use the CDS;

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(c) the source code for the CDS, including that deposited with the Escrow Agent, shall, without reference to Digimarc or any of its employees or authorized subcontractors, be understandable and usable by expert personnel familiar with the programming languages, and scientific and processing techniques, used therein, and shall not involve any programming components that such personnel could not reasonably be expected to understand, and if necessary such source code shall contain sufficient commentary to enable such personnel to understand and use such components; and

(d) the Escrowed Materials deposited with the Escrow Agent under this Agreement shall contain all information in human readable form and on suitable media to enable an expert technical consultant, familiar with the scientific and processing techniques used therein, to understand and use the same without reference to Digimarc or any of its employees and authorised subcontractors.

10.3 Digimarc represents, warrants and undertakes to the BIS that:

(a) [**] accepted by the CBCDG Contract Authority shall meet the Specifications for that version from the date that it is accepted by the CBCDG Contract Authority until the earlier of the date on which the next version is accepted by the CBCDG Contract Authority and the last day of the Term; and

(b) until the last day of the Term, every [**] provided by Digimarc to any Person for incorporation into any Device shall be capable of meeting the performance criteria which formed part of the Specifications for the version of the [**] last accepted by the CBCDG under this Agreement at the time such detector was so provided.

10.4 [**] shall not be counted in the determination under clause 10.3 as to whether or not an [**] meets the Specifications.

11. REPRESENTATIONS AND WARRANTIES OF THE BIS

11.1 The BIS represents and warrants to Digimarc that:

(a) the BIS has full power and authority to enter into this Agreement;

(b) this Agreement when executed and delivered by the BIS shall constitute a valid, binding and enforceable obligation of the BIS; and

(c) the BIS will at all material times have the right to grant the licenses required by this Agreement to the BIS Technology.

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12. CONFIDENTIALITY

12.1 Except as otherwise expressly permitted by this Agreement, a Recipient shall not use, reproduce or disclose the Confidential Information of the Discloser for any purpose other than as reasonably necessary to comply with its obligations under this Agreement or to exercise any rights or licenses granted to it under or pursuant to this Agreement.

12.2 The Recipient shall protect the Confidential Information of the Discloser from disclosure by using the same degree of care, which shall be no less than a reasonable degree of care, as the Recipient uses to protect its own confidential information.

12.3 On written request from the Discloser, the Recipient shall return, or certify the destruction of, all originals and copies of the Discloser’s Confidential Information in the Recipient’s possession or control which the Recipient does not need to retain in order to perform any obligations imposed, or exercise any rights acquired, by this Agreement.

12.4 A Recipient may, on a need to know basis, and only for the purposes described in clause 12.1, give the Discloser’s Confidential Information to the Recipient’s employees, authorized subcontractors or representatives provided that such employee, subcontractor or representative shall have entered into a non-disclosure agreement in respect of such Confidential Information in favor of the Discloser on terms requiring at least five years of confidentiality from the date of disclosure of such Confidential Information but that are in all other respects materially similar to the provisions of this clause 12. For greater certainty, the BIS’ representatives shall include the CBCDG Contract Authority, the CBCDG Project Director and all representatives of members of the CBCDG.

12.5 The obligations set out in this clause 12 shall not apply to any Confidential Information that:

(a) is or becomes publicly available other than through the fault of the Recipient;

(b) was known to the Recipient prior to disclosure as shown by documentation sufficient to establish such knowledge;

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(c) was or is lawfully disclosed to the Recipient by a third party who did not breach any obligation of confidence by such disclosure and who made the disclosure without restriction on further disclosure all of which is shown by documentation sufficient to establish the same; or

(d) is required by law to be disclosed provided, however, that the Recipient shall first give written notice to the Discloser before the disclosure so that the Discloser may seek an appropriate protective order.

The fact that Confidential Information, or any part thereof, can be linked together by a search of publications and other information, followed by a selection of a series of such items of knowledge from unconnected sources, and fitting together those items of knowledge so as to duplicate or recreate any item of Confidential Information, shall not be deemed to cause the Confidential Information, or any part thereof, to be included within exceptions (a), (b) or (c), above.

12.6 If either party is required by applicable law or regulation, by legal process or by the U.S. Securities and Exchange Commission or listing requirements of any exchange or quotation system on which securities of any party may be listed or quoted, to disclose the terms of this Agreement (such disclosure being referred to herein as “Legally Required Disclosure”), such party shall provide the other party with prompt notice of such requirement so that the other party may seek an appropriate protective order or remedy. In the event the other party fails to obtain an order or remedy that would permit the requested party not to disclose the required terms, the disclosure shall be permitted, but the disclosing party shall use all reasonable efforts to have the disclosure treated confidentially by the recipient.

12.7 Nothing in this Agreement shall be construed to require the BIS or any representative of the BIS including, for greater certainty, the CBCDG Project Director or the CBCDG Contract Authority, to disclose any information which is confidential to a third party including for greater certainty a [**].

12.8 The BIS shall not reverse-engineer, disassemble, or decompile any [**] forming part of the CDS, including the [**] (except to the extent that (i) any such activity is reasonably necessary to permit the BIS to exercise its [**] clause 8.2 of this Agreement or (ii) the BIS’ right to do so may not be contractually restricted under applicable law), and shall contractually assure that any other Person to whom the BIS provides [**] shall be similarly obliged.

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12.9 For greater certainty the obligations imposed by this clause 12 shall apply to the Escrowed Material.

12.10 General attributes of the CDS may be disclosed in connection with promotion of the CDS to the [**] and [**], and to customers or prospects in related markets; information relating to the CDS Technology may be disclosed to [**], [**] subject to a nondisclosure agreement on terms requiring at least [**] years of confidentiality from the date of disclosure of such Confidential Information, but that are in all other respects materially similar to the provisions of this clause 12, but in all such cases Digimarc may disclose information relating to the [**] only to [**] but to no others. The existence and terms of this Agreement may be disclosed to the parties’ professional advisors, to members of the CBCDG, and to Digimarc’s shareholders, institutional and corporate investors, and commercial and investment bankers, who have a reasonable need to know such information subject to a non-disclosure agreement, or as required by applicable law or regulations.

13. AUDIT AND INSPECTION

13.1 The CBCDG Contract Authority, or its duly authorised representatives, may from time to time, without notice, at its own expense, conduct an audit or inspection during normal business hours to verify Digimarc’s compliance with its obligations under this Agreement. Digimarc shall facilitate such audit activities by providing access to its premises, as well as any books, records, and other information relating to this Agreement and the Services as may be reasonably requested by the CBCDG Contract Authority. The CBCDG Contract Authority shall promptly advise Digimarc in writing of the results of any audit. If the CBCDG Contract Authority exercises this right more frequently than twice in each calendar year, the CBCDG Contract Authority shall reimburse Digimarc’s reasonable costs related thereto which costs are in addition to the Allowable Costs otherwise contemplated by this Agreement except in the case where the exercise of such right is reasonably required to follow-up on a non-compliance detected during a previous audit or inspection.

13.2 If, as a result of any such audit, the CBCDG Contract Authority is of the view that Digimarc has engaged in or is about to engage in any act, or has omitted to perform any act, which act or omission is not in compliance with Digimarc’s obligations under this Agreement, the CBCDG Contract Authority may issue to Digimarc a directive requiring Digimarc to refrain from engaging in such act or to perform such act or acts as the CBCDG Contract Authority deems necessary, acting reasonably, for Digimarc to comply with this Agreement and Digimarc shall promptly comply with such directive at its own expense.

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13.3 No act performed by the CBCDG Contract Authority or its duly authorised representatives pursuant to the provisions of this clause 13 and no omission by any of them to perform an act pursuant to the provisions of this clause 13 shall in any way affect Digimarc’s obligation to comply with this Agreement.

14. DISPUTE RESOLUTION

14.1 Any Dispute, as defined in the Arbitration Agreement, shall be finally settled by arbitration in accordance with the Arbitration Agreement.

14.2 Unless otherwise agreed between the parties or unless the subject matter of the dispute resolution proceedings is a party’s right to terminate this Agreement, the Services shall continue during the arbitration proceedings and payments due to Digimarc shall not be withheld on account of such proceedings unless that particular Service or payment is the subject matter of the proceedings. Notwithstanding the foregoing, the CBCDG Contract Authority may at its sole discretion instruct Digimarc to continue the performance of that Service, and Digimarc shall act in accordance with those instructions, subject to payment in accordance with this Agreement.

15. TERM AND TERMINATION

15.1 This Agreement shall take effect on the Effective Date and shall remain in force throughout the Term unless sooner terminated as provided herein. This Agreement may be extended for five additional years upon mutual agreement.

15.2 The BIS may in its sole discretion terminate this Agreement effective immediately on notice to Digimarc if:

(a) Digimarc makes a general assignment or any other arrangement for the benefit of its creditors;

(b) a proposal or arrangement under applicable bankruptcy or insolvency legislation, or a petition is filed by or against Digimarc under applicable bankruptcy or insolvency legislation and is not discontinued within thirty (30) days;

(c) Digimarc is declared or adjudicated bankrupt or goes into liquidation;

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(d) a liquidator, trustee in bankruptcy, custodian, receiver, administrator, administrative - receiver, manager, or any other officer with similar power is appointed over all or any part of the assets and undertaking of Digimarc;

(e) Digimarc commits an act of bankruptcy, institutes proceedings to be adjudged bankrupt or insolvent, consents to the initiation of such appointment or proceedings or admits in writing inability to pay debts generally as they become due;

(f) Digimarc assigns this Agreement without the BIS` consent in breach of clause 18.7; or

(g) Digimarc ceases or threatens to cease business.

15.3 Either party may terminate this Agreement effective immediately on notice to the other party if:

(a) the other party fails, or is unable or refuses to perform any of its obligations under this Agreement (hereinafter referred to as a “Breach”) and fails to remedy such Breach within sixty (60) days after receiving written notice of such Breach from the other party; or

(b) an event of force majeure (as defined in clause 16) has continued for a period longer than sixty (60) continuous days or such longer period as the parties may agree and no satisfactory alternative arrangements have been agreed to continue the Services.

15.4 Notwithstanding the foregoing, the BIS has no right to terminate this Agreement for Breach under clause 15.3 if the Breach consists of a failure by Digimarc to perform a particular task the performance of which proves to be technically infeasible provided that the CBCDG Project Director has agreed with the Digimarc Project Director in writing before the task is commenced that the task may be technically infeasible.

15.5 The BIS may terminate the Agreement for convenience without cause. Such termination shall be effective no earlier than six months from the date on which the BIS gives written notice of such termination to Digimarc.

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15.6 In the event of a termination for convenience under this clause 15, Digimarc shall be paid all of its actual and reasonable termination costs including:

(a) third party contract termination costs;

(b) employee re-deployment or termination costs including severance, outplacement, benefits, acceleration of stock compensation and employer paid payroll taxes;

(c) stay bonuses approved by the CBCDG Contract Authority to retain key employees through contract termination date;

(d) undepreciated capital costs of assets purchased exclusively for the project, plus [**]; and

(e) accounting, legal and travel costs associated with termination and termination negotiations (all collectively “Termination Costs”).

Digimarc shall use commercially reasonable efforts to mitigate all Termination Costs.

15.7 Actual and reasonable Termination Costs shall be capped [**].

15.8 Under a termination for convenience under clause 15, Digimarc shall also be paid an amount equal to [**].

15.9 If an approved Plan Budget for any calendar year does not amount to at least [**], Digimarc has the option to consider this a termination for convenience. If Digimarc exercises this option, Digimarc shall be paid the amounts in clauses 15.6-15.8. Within [**] months of the approval of a Plan Budget below [**], Digimarc can exercise the option with notice. If Digimarc exercises this option, the agreement will terminate [**] months after notice from Digimarc.

15.10 On termination of this Agreement for any reason, the TAP shall be implemented and Digimarc shall be reimbursed for all Services performed through the date of termination and for any transition services provided under the TAP.

15.11 On termination of this Agreement for any reason, the [**] by Digimarc under clauses 2.2, 2.3 and 2.8 shall continue, but the CBCDG Contract Authority shall make arrangements to assume all of: (a) Digimarc’s obligations of support and other Digimarc resource allocation; and (b) Digimarc’s obligations arising from or related to any third party threat or claim for IP infringement brought against any such licensees, subject to clause 9.12(c).

15.12 On termination of this Agreement for any reason, Digimarc shall within fifteen (15) Business Days deliver to the Escrow Agent all work in progress done up to the effective

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date of termination which has not previously been deposited with the Escrow Agent and issue to the CBCDG Contract Authority a certificate signed by an authorized representative of Digimarc that it has fully complied with this obligation. Digimarc shall be entitled to charge for its reasonable costs in providing such assistance calculated in accordance with the Allowable Costs.

16. FORCE MAJEURE

16.1 If the performance by any of the BIS, Digimarc, the CBCDG, the CBCDG Contract Authority, the CBCDG Project Director or the CBCDG Project Office (the “Obstructed Party) of any of its obligations under this Agreement is prevented or delayed by any circumstance of force majeure, which shall mean fire, flood, earthquakes, war, riots, or insurrection, the Obstructed Party shall immediately provide notice under clause 17.

16.2 The time period within which the Obstructed Party is obliged to perform its obligations shall be delayed during the period such circumstance exists. During the period of delay the Obstructed Party shall use commercially reasonable efforts to make alternate arrangements satisfactory to the other Persons mentioned in clause 16.1 to avoid delay or resume performance.

17. NOTICES

17.1 All notices under this Agreement shall be delivered by fax, or recognized international courier service. The notice shall be deemed effective as of the date of delivery to the address of the party specified below as evidenced by a delivery receipt or the addressee’s registry of incoming correspondence. Unless otherwise expressly set out in this Agreement, all notices to a party shall be sent to the party’s authorized representative identified below and all notices from a party shall be sent by the party’s authorized representative identified below.

17.2 Any notice to Digimarc shall be sent to, and any notice from Digimarc shall be sent by:

Mr. Robert Chamness

Executive Vice President and

Chief Legal Officer and Secretary

Digimarc Corporation

9405 SW Gemini Drive

Beaverton, Oregon 97008 USA

FAX: (503) 469-4777

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With a copy to:	Mr. George Rieck
	Vice President, Government Programs and
	Digimarc Project Director
	Digimarc Corporation
	9405 SW Gemini Drive
	Beaverton, Oregon 97008 USA
	FAX: (503) 469-4777

17.3 Any notice to the BIS shall be sent to, and any notice from the BIS shall be sent by:

	Bank for International Settlements
	[**]
	Centralbahnplatz 2
	CH-4002 Basel, Switzerland
	[**]
	With a copy to: [**]
Any notice to the CBCDG shall be sent to, and any notice from the CBCDG shall be sent by:
	[**]
With a copy to:	Bank for International Settlements
	[**]
	Centralbahnplatz 2
	CH-4002 Basel, Switzerland
	[**]

17.4 A party may change its addressee(s) or address(es) for notice by notice to the other party in accordance with the provisions of this clause 17.

18. MISCELLANEOUS PROVISIONS

18.1 Remedies Cumulative - Except as otherwise expressly set out in this Agreement:

(a) each and every right, power and remedy of a party shall be considered to be cumulative with and in addition to any other right, power and remedy which such party may have at law or in equity in the event of breach of any of the terms of this Agreement;

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(b) the exercise or partial exercise of any right, power or remedy shall neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such party; and

(c) a party terminating this Agreement in accordance with the provisions of this Agreement shall have no liability or obligation to the other as a result of or with respect to the termination.

18.2 Severability. If any part of this Agreement is held by an arbitral tribunal appointed pursuant to the Arbitration Agreement or by any other competent authority to be void or unenforceable, the parties agree that such determination shall not result in the nullity or unenforceability of the remaining parts of this Agreement, which shall continue in force to the fullest extent permitted by law. The parties further agree to replace such void or unenforceable part of this Agreement with a valid and enforceable provision that will achieve, to the extent legally permissible, the economic, business and other purposes of the void or unenforceable part.

18.3 Counterparts. This Agreement may be executed in separate counterparts, and by facsimile, each of which shall be deemed an original, and when executed, separately or together, will constitute a single original instrument, effective in the same manner as if the parties had executed one and the same instrument.

18.4 Entire Agreement. This Agreement is intended by the parties to be the final expression of their agreement and constitutes and embodies the entire agreement and understanding between the parties hereto and constitutes a complete and exclusive statement of the terms and conditions thereof, and shall supersede any and all prior correspondence, conversations, negotiations, agreements or understandings between the parties relating to the same subject matter from the Effective Date. Nothing in this clause 18.4 shall operate so as to limit or exclude any liability for fraud or fraudulent misrepresentation.

18.5 Amendments. No change in, modification of or addition to the terms and conditions contained herein shall be valid as between the parties unless set forth in a writing that is signed by an authorized representative of each party and which specifically states that it constitutes an amendment to this Agreement.

18.6 Waiver. No waiver of any term, provision, or condition of this Agreement shall be effective unless in a written document signed by the waiving party and no such waiver in any one or more instances, will be deemed to be, or be construed as, a further or continuing waiver of that term, provision or condition or any other term, provision or condition of this Agreement.

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18.7 Assignment and Successors. This Agreement may not be assigned, novated or otherwise transferred by Digimarc without the prior written consent of the BIS, which consent shall not be unreasonably withheld. For the purpose of this Agreement, an assignment includes a change in the voting control of Digimarc or the sale or other disposal of substantially all of Digimarc’s assets. This Agreement and all of its terms, conditions and covenants are intended to be fully effective and binding, to the extent permitted by law, on the successors and permitted assigns of the parties hereto.

18.8 Captions. Captions are provided in this Agreement for convenience only and they form no part, and are not to serve as a basis for interpretation or construction, of this Agreement, nor as evidence of the intention of the parties.

18.9 Disclaimer of Agency. Nothing contained in this Agreement is intended or shall be interpreted so as to constitute the parties to this Agreement as partners or joint venturers or as agents of each other. Neither party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of any other party or to bind any other party in any contract, agreement or undertaking with any third party. No employee of a party shall be deemed or considered to be an employee of the other party or of both parties.

18.10 The parties agree that from time-to-time it will be beneficial to both parties to issue press releases and other public announcements concerning benefits arising from the [**] of the CDS. Each party agrees to submit such releases or announcements for prior approval by the other party if the name of the other party is mentioned, which approval may be withheld by the other party in its sole discretion. Any Digimarc press releases and public announcements that mention the CDS or the CBCDG must be pre-approved by the CBCDG Project Director.

18.11 Effectiveness. This Agreement shall be effective only after it is signed by both of the parties.

18.12 Ambiguities. Each party and its counsel have participated fully in the review and revision of this Agreement. Any rule or construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement.

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CDS DLA 1-January 2013 39 Confidential

18.13 Survival. All clauses of this Agreement which expressly or by implication are intended to survive the termination of this Agreement shall do so and, for greater certainty and notwithstanding any provision in this Agreement to the contrary, the provisions set out in clauses 1.3, 2.14, 6.1-6.8, 8, 9.1-9.6, 9.10, 9.12(c) and 10-18 of this Agreement shall survive termination of this Agreement by either party for any reason.

18.14 No third party Person shall have any right to enforce any provision of this Agreement under the Contracts (Rights of Third Parties) Act 1999.

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the Effective Date.

BANK FOR INTERNATIONAL SETTLEMENTS		DIGIMARC CORPORATION
Signature		Signature
Name:	[**]	Name:	Robert Chamness
Title:	[**]	Title:	Executive Vice President, Chief Legal Officer and Secretary
Date:	6 December 2012	Date:	December 6, 2012
Signature
Name:	[**]
Title:	[**]

Date: 6 December 2012

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CDS DLA 1-January 2013 40 Confidential

SCHEDULE A

SYSTEM DESCRIPTION

1.0 GENERAL DESCRIPTION OF THE COUNTERFEIT DETERRENCE SYSTEM (“CDS”)

The CDS is a system for the deterrence of the unauthorized digital reproduction of bank notes by the use of personal computer-based equipment. [**]

The capitalized terms in this Schedule A have the meanings provided in the Renewed and Extended Counterfeit Deterrence System Development and License Agreement and are not elaborated herein.

2.0 FUNCTIONAL DESCRIPTION OF THE CDS

The CDS is comprised of the following three subsystems:

1. [**]

2. [**]

3. [**]

The functions of the various subsystems and components described below may be changed by the [**].

2.1 [**]

2.1.1 [**]

1. [**]

2. [**]

3. [**]

4. [**]

2.1.2 [**]

1. [**]

2. [**]

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Schedule A: System Description - 1 January 2013

3. [**]

2.2 [**]

1. [**]

2. [**]

3. [**]

4. [**]

(a) [**]

(b) [**]

(c) [**]

5. [**]

6. [**]

7. [**]

8. [**]

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Schedule A: System Description - 1 January 2013

SCHEDULE B

DIGIMARC TECHNOLOGY

The Digimarc Technology includes techniques and system applications for [**].

This technology is partially described in the following issued representative U.S. and International patents:

US 5,636,292 C1	US	5,768,426
US 5,710,834	US	5,809,160
US 5,721,788	US	5,832,119 C1
US 5,745,604	US	5,850,481 C1
US 5,748,763		[**	]

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Schedule B: Digimarc Technology - 1 January 2013

SCHEDULE C

PROJECT TECHNOLOGY

The Project Technology includes:

1. The modification of techniques for using the Digimarc Technology and the BIS Technology in the [**].

2. The effects and behaviors of [**] when used in [**].

3. The effects of various types [**].

4. Improvements to Digimarc’s testing and certification processes used in testing and certifying [**].

5. The improvement of [**].

6. The use of [**].

7. Examples of Project Technology include:

[**]±

[**] [**] [**]

[**]
	[**]	[**]	[**]	[**]
[**]				[**]
[**]

[**]
	[**]	[**]	[**]	[**]
[**]				[**]
[**]
[**]
[**]
[**]

[**]

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± Omitted portion consists of one and one-half pages.

Schedule C: Project Technology - 1 January 2013

[**]
	[**]	[**]	[**]	[**]
[**]				[**]
[**]
[**]
[**]
[**]
[**]
[**]
	[**]	[**]	[**]	[**]
[**]				[**]
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[**]
[**]

[**]

[**]
	[**]	[**]	[**]	[**]
[**]				[**]
[**]
[**]
[**]

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Schedule C: Project Technology - 1 January 2013

[**]
	[**]	[**]	[**]	[**]
[**]				[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]

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Schedule C: Project Technology - 1 January 2013

[**]
	[**]	[**]	[**]	[**]
[**]
[**]

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Schedule C: Project Technology - 1 January 2013

[**]±

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Schedule C: Project Technology - 1 January 2013

SCHEDULE D

SECURITY REQUIREMENTS

1. Digimarc shall implement the security measures normally followed by a [**] and distributor comparable to Digimarc in number of employees and revenue engaged in the development and distribution of [**] and maintain such security measures in effect at all times throughout the Term. The security measures will include:

1.1. Electronic security for protection of the network and protection of the CDS [**] products that are under development.

(a) Network protection which will ensure that unauthorized users will not get access to [**]. This protection will include:

i. erecting barriers to prevent hackers, whether inside or outside the Digimarc facility, from accessing the secure network; and

ii. the customizing of developmental and operational procedures for the software development team that maximizes security while not impeding the team’s ability to work efficiently and effectively.

1.2 Physical security, including the following:

(a) the Digimarc facility at which the Services will be performed will be secure from unauthorized visitors;

(b) the development laboratory and the computer network employed in the Services shall be secure;

(c) all personnel authorized to have access to sensitive CDS information, data and designs including the employees of authorized subcontractors will be properly screened; and

(d) production and handling of interim and final versions of the Deliverables will be carefully controlled, monitored and audited.

2. [**]

3. The CBCDG can conduct an audit, at its own expense, of the security measures with ten (10) Business Days’ notice.

4. Following any such audit, the CBCDG Project Director shall submit an audit report to Digimarc which will prescribe the actions which Digimarc must take, if any, to improve the security measures to be followed by Digimarc to make such measures consistent with item 1 of this Schedule D and the dates by which Digimarc shall take them.

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Schedule D: Security Requirements - 1 January 2013

SCHEDULE E

TRAINING

1.0 As part of the Services, Digimarc shall develop a program of training acceptable to the CBCDG Project Director in the [**].

2.0 Digimarc shall deliver Training as follows:

2.1 Digimarc shall provide the Training for multiple people simultaneously. The exact number of trainees is to be agreed upon by both parties prior to Training. The trainees will be experienced in digital design operation.

2.2 Digimarc shall conduct the Training at the facilities of the [**] or at the request of the [**] at Digimarc’s facilities or at some other place agreed between Digimarc and the [**].

2.3 Digimarc shall give the [**] reasonable notice concerning the equipment which Digimarc will require in order to conduct the Training. The [**] shall provide all such equipment at its own expense. If the parties are unable to agree on the equipment to be provided either party may refer the matter for decision to the CBCDG Contract Authority.

2.4 Digimarc shall conduct the Training using a [**] or other training designs as provided by Digimarc.

2.5 Digimarc shall provide a training manual in English to every trainee. Any translation or interpretation which the trainees may require will be provided by the [**] at its own expense.

2.6 Digimarc shall conduct the training in English. Any translation or interpretation which the trainees may require will be provided by the [**] at its own expense.

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Schedule E: Training - 1 January 2013

SCHEDULE F

ALLOWABLE COSTS

1. For the purposes of this Schedule F:

[**]±

[**]

[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
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[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]

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± Omitted portion consists of two pages.

Schedule F: Allowable Costs - 1 January 2013

[**]±
[**]
[**]	[**]
[**]	1.      [**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]
[**]	1.      [**]
[**]	[**]
[**]	[**]
[**]	1.      [**]

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Schedule F: Allowable Costs - 1 January 2013

SCHEDULE G

ARBITRATION AGREEMENT

This is an Agreement by and among the Parties to the Agreements listed in Schedule A to submit for final and binding resolution by international arbitration all Disputes (as defined below) arising out of or otherwise connected to a project relating to the development and potential licensing, marketing and servicing of a Counterfeit Deterrence System (as defined in the Renewed and Extended Development and License Agreement identified below) and the services of Digimarc (as defined below) in relation to the project.

WHEREAS, Digimarc Corporation, a corporation existing under the laws of the State of Oregon, USA, has developed and is developing, in conjunction with a group of central banks known as the Central Bank Counterfeit Deterrence Group (the “CBCDG”) technology [**] (the “Counterfeit Deterrence System” or “CDS” as defined in the Development and License Agreement identified below);

WHEREAS, the CBCDG has asked the Bank for International Settlements, an international organisation created as a result of the Hague Agreements of January 1930 (the “BIS”), to provide it with limited assistance in connection with the development and potential subsequent licensing of the CDS as set out in a Renewed and Extended Development and License Agreement (the “DLA”) effective from 1 January 2013;

WHEREAS, in the course of performance of the DLA, Digimarc may be directed to issue licenses to certain [**] in accordance with standard forms of license agreement which are approved by the CBCDG;

WHEREAS, [**], pursuant to an [**], as amended from time to time, (the “[**]”), agreed to compensate and to indemnify and hold harmless the [**] in respect of any liability in connection with the project;

WHEREAS, given the international nature of the Agreements (as defined below), all the Parties (as defined below) to the Agreements are desirous to avoid recourse to national courts and the potential expense and delay of prosecuting connected Claims (as defined below) in more than one proceeding and also to exclude the risk of having to apply contradictory or inconsistent fact-findings, conclusions, judgments or awards for any Dispute (as defined below) which may arise between or among the Arbitrating Parties (as defined below) and instead wish to resort to international arbitration as the exclusive means of resolving in a final, binding and consistent manner all Disputes arising in connection with the Agreements for the CDS and of establishing through this Arbitration Agreement a mechanism to these ends.

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Schedule G: Arbitration Agreement - 1 January 2013

The Parties agree as follows:

1. The meaning of the following terms in this Arbitration Agreement shall be as set out below:

a) “Agreements” shall mean the agreements, contracts, schedules or other arrangements in connection with the development or licensing or marketing or servicing of the CDS listed in Schedule A, as amended from time to time.

b) “Appointing Authority” shall mean the [**].

c) “Arbitrating Party” or “Arbitrating Parties” shall mean (i) any and all Parties which have become involved in any arbitration under this Arbitration Agreement as Claimants or Respondents or (ii) any and all Parties which have been otherwise joined to any arbitration under this Arbitration Agreement or (iii) the BIS, Digimarc, any [**] or any [**] in the aforementioned circumstances or when it or they has or have exercised their right of Intervention in any arbitration under this Arbitration Agreement.

d) “[**]” shall mean any [**] which is represented on the CBCDG from time to time.

e) “CBCDG Project Office” shall mean the project office established by the CBCDG, or its staff as the case may be, and that is responsible for the oversight of the overall relationship among the BIS, the [**] and Digimarc and for the key day to day project management.

f) “Claim” shall include without limitation any claim or counterclaim or crossclaim made by an Arbitrating Party.

g) “Claimant” or “Claimants” shall mean any Party which, either separately or together with any other Party or Parties, initiates arbitration under this Arbitration Agreement.

h) “Dispute” shall mean any dispute, difference, controversy or claim between or among the parties arising out of or relating to or in connection with this Arbitration Agreement or any of the Agreements listed in Schedule A, including their signature, validity, interpretation, performance, amendment, breach, termination and post-termination obligations.

i) “Intervention” shall mean the right of any of the BIS, Digimarc, any [**] or any [**] under Articles 8(e)-(h) to intervene into a particular arbitration as an Arbitrating Party even when it is not a Claimant or Respondent and has not been joined into any arbitration by an Arbitrating Party.

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Schedule G: Arbitration Agreement - 1 January 2013

j) “[**]” shall mean an entity responsible for the [**] that is licensed by Digimarc to use the CDS.

k) “Notice of Arbitration” shall mean the document given when initiating recourse to arbitration or to join any Party as Arbitrating Party as well as to initiate recourse in arbitration against any Party which is already an Arbitrating Party.

l) “Party” or “Parties” shall mean any person, company or organization that is party to one of the Agreements listed in Schedule A and that has agreed in writing to be bound by the terms of this Arbitration Agreement.

m) “Respondent” or “Respondents” shall mean any Party which, either separately or together with any other Party, is named as a Respondent in arbitration by any Claimant or Claimants.

n) In interpreting this Arbitration Agreement, singular shall be read for plural where appropriate to reflect the multi-party nature of any arbitration.

2. Any Dispute shall be finally settled by arbitration under the [**] as in force at the date of commencement of this Arbitration Agreement except as the [**] Rules are modified in the body and Schedule B of this Arbitration Agreement and to the exclusion of any provisions of the [**] Rules as are inconsistent with the express provisions of this Arbitration Agreement or with the multi-party nature of an arbitration under this Arbitration Agreement.

3. The language used in any arbitration shall be English. All documents submitted into any arbitration shall be in English or submitted with a complete English translation. Oral evidence may be submitted in a language other than English provided that the Arbitrating Party submitting the oral evidence makes provision for its simultaneous interpretation into English. The cost of any translation or interpretation into English shall be borne entirely by the Arbitrating Party on whose behalf the non-English document or oral evidence is submitted and shall not be included among the “costs of arbitration” apportioned pursuant to Article 40 of the [**] Rules.

4. The place of Arbitration shall be [**].

5. Arbitration pursuant to this Arbitration Agreement shall be the sole and exclusive means for resolving any Dispute.

6. No entity shall become a Party unless that entity has agreed in writing to be bound by the terms of this Arbitration Agreement.

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Schedule G: Arbitration Agreement - 1 January 2013

7. Each Party to this Arbitration Agreement hereby expressly accepts the addition of new parties to this Agreement.

8.

a) Any Claimant or Claimants shall initiate recourse to arbitration by giving to each Respondent a Notice of Arbitration and statement of claim which specify, inter alia, the Agreement or Agreements involved in the Dispute. Any Claimant or Claimants shall also at the same time send a copy of the same Notice of Arbitration and statement of claim to all other Arbitrating Parties, the BIS, the CBCDG Project Office and the [**]. Arbitration shall be deemed to commence upon receipt of the Notice of Arbitration and statement of claim by the [**].

b) Within thirty (30) days of the date on which each Respondent received the Notice of Arbitration, a Respondent may give a third party Notice of Arbitration in order to join into the arbitration any Party or Parties as an Arbitrating Party or Arbitrating Parties. The Respondent shall also at the same time send a copy of any third party Notice of Arbitration to all other Arbitrating Parties, the BIS, the CBCDG Project Office and the [**].

c) Any third party joined as an Arbitrating Party may, within thirty (30) days of receipt of any third party Notice of Arbitration, give fourth party Notices of Arbitration in order to join any Party or Parties as an Arbitrating Party or Arbitrating Parties. The third party shall also at the same time send a copy of any fourth party Notice of Arbitration to all other Arbitrating Parties, the BIS, the CBCDG Project Office and the [**].

d) Other Parties may be joined as further additional Arbitrating Parties by any Arbitrating Party or Arbitrating Parties until such time as thirty (30) days have elapsed without a new Arbitrating Party being joined into the arbitration.

e) The BIS, whether or not joined as a Respondent or as a further additional Arbitrating Party, shall have the right to intervene in any arbitration by giving a Notice of Arbitration to each of the Arbitrating Parties within thirty (30) days after receipt of the copy of a Notice of Arbitration from the last Arbitrating Party to be joined or from the last Party to request permission to intervene under Article 8(f). The BIS shall also at the same time send a copy of the Notice of Arbitration to the CBCDG Project Office, the [**] and to all other Arbitrating Parties.

f) Digimarc, any [**], whether or not joined as a Respondent or as a further additional Arbitrating Party, shall have the right to ask the arbitrator for permission to intervene in any arbitration by giving a Notice of Arbitration to each of the Arbitrating Parties within thirty (30) days after receipt of the copy of a Notice of Arbitration from the last Arbitrating Party to be joined or from the BIS. The Party requesting to intervene shall also at the same time send a copy of the Notice of Arbitration to the BIS, the CBCDG Project Office, the [**] and to all other Arbitrating Parties.

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Schedule G: Arbitration Agreement - 1 January 2013

g) The CBCDG Project Office shall, upon receipt of any Notice of Arbitration under this Article 8 of this Arbitration Agreement, send a copy of such Notice of Arbitration to all Parties.

h) The arbitral tribunal, once constituted and after affording the Arbitrating Parties a reasonable period of time in which to comment, shall have the authority to require by an order that any Party or Parties which is not or are not an Arbitrating Party or Arbitrating Parties (including Digimarc, any [**] requesting intervention under Article 8(f)) shall nonetheless be joined into the arbitration as an Arbitrating Party or Arbitrating Parties should the arbitral tribunal determine that: (a) the absence of said Party or Parties from the pending arbitration would prevent the according of complete relief in regard to the Claims of the Arbitrating Parties; or (b) that the Party or Parties has or have a real and significant interest in the Agreement or Agreements out of or in connection with which the Disputes involved in the pending arbitration have arisen and that the absence of said Party or Parties would significantly impede its or their ability to protect that interest. Any such order issued by the arbitral tribunal shall be final and binding upon the Parties that are the subject of that order and such Parties will be considered Arbitrating Parties to that Claim or Dispute.

i) Any Arbitrating Party may join into a pending arbitration any Dispute which presents issues of law or fact common with those in the Dispute or Disputes already in the pending arbitration by issuing, within 30 days of its receipt of a Notice of Arbitration, a Notice of Arbitration and a statement of claim which specify, inter alia, the Agreement or Agreements involved in the Dispute and set out the issues of law or fact it alleges are common with those in the Dispute or those Disputes already in the pending arbitration.

j) The arbitral tribunal shall determine by an order, which shall be final and binding upon the Arbitrating Parties, any issue raised by an Arbitrating Party as to whether or not a Dispute joined into any pending arbitration did, in fact, at the time it was joined into the arbitration, present issues of law or fact common with those presented in other Disputes in the pending arbitration. Any Dispute which is found not to have presented common issues of law or fact shall be dismissed without prejudice from the pending arbitration.

k) Joinder of any Party or Parties or of any Dispute or Disputes to any arbitration pursuant to this Arbitration Agreement shall be permitted only when made in accordance with the provisions of this Arbitration Agreement, including the strict time limits and no joinder or Intervention other than those provided for shall be permitted.

l) Any multi-party arbitration arising as a result of there being more than two Arbitrating Parties will be conducted as a single arbitration involving all Arbitrating Parties.

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Schedule G: Arbitration Agreement - 1 January 2013

m) Any Arbitrating Party giving any Notice of Arbitration or sending any copy of a Notice of Arbitration shall send to each recipient according to the provisions set out above a full copy of the document by international courier or other appropriate means of ensuring rapid and certain delivery and, when required to send documents to several recipients, the Arbitrating Party shall send all documents on the same day.

n) Any advances deemed necessary to cover the costs of any arbitration shall be made in equal shares by all Arbitrating Parties, provided that multiple Claimants or multiple Respondents shall be deemed to constitute one Arbitrating Party for purposes of this subparagraph only, and provided further that should any Arbitrating Party fail to advance its share (a “Defaulting Arbitrating Party”), it shall be the responsibility of the Arbitrating Party which gave the Notice of Arbitration against the Defaulting Arbitrating Party or Defaulting Arbitrating Parties to advance the share due from the Defaulting Arbitrating Party or Defaulting Arbitrating Parties. Any Claim brought by a Defaulting Arbitrating Party shall be dismissed without prejudice. However, the recipient of any Notice of Arbitration given by a Defaulting Arbitrating Party shall continue to be an Arbitrating Party if it has itself given any Notice of Arbitration, unless it withdraws any such Notice of Arbitration. Should any Defaulting Arbitrating Party commence arbitration in order to reassert any Claim which has been dismissed pursuant to this subparagraph, that Claim shall be consolidated with the pending arbitration from which it was dismissed and the Defaulting Arbitrating Party shall not be permitted to proceed with that Claim until it has advanced its share of the costs of the pending arbitration.

9. If any Dispute arises whilst an arbitration is pending in accordance with the provisions of this Arbitration Agreement, but one or more of the Arbitrating Parties to that Dispute cannot be joined to the pending arbitration in accordance with the provisions of Article 8 of this Arbitration Agreement, the Dispute and the Arbitrating Parties thereto shall nonetheless be joined into the pending arbitration at the request of a Party which is an Arbitrating Party in both the pending arbitration and the Dispute which has arisen so that the Disputes may be resolved in the same arbitration, provided the arbitral tribunal decides that the later Dispute presents issues of law or fact common with those in the pending arbitration and that joinder under these circumstances would not result in undue delay for the pending arbitration.

10. Each Party agrees that neither an arbitral tribunal established pursuant to this Arbitration Agreement nor the Parties shall be authorised to take or seek from any arbitral tribunal or judicial authority any interim measure or any pre-award relief against the BIS, any provision of the [**] Rules notwithstanding. Nothing in this Arbitration Agreement shall operate or be regarded as a waiver, renunciation or other modification of the [**] BIS [**], of whatever nature and wherever situated, under international convention or under any applicable law. Except as otherwise provided in this Article 10 with regard to the BIS, each Party irrevocably agrees that, to the extent that it or any of its assets has or hereafter may acquire any right of immunity, whether characterized as sovereign

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Schedule G: Arbitration Agreement - 1 January 2013

immunity or otherwise, from any legal proceedings, whether in [**] or elsewhere, to enforce or collect upon any obligation of that Party in connection with the transaction contemplated under any Agreement, including, without limitation, immunity from jurisdiction of any arbitral tribunal, immunity from service of process, immunity from execution of judgment and immunity of any of its property from attachment prior to the rendering of an arbitral award under this Arbitration Agreement or entry of judgment, it hereby expressly and irrevocably waives all such immunity.

11.

a) Any Dispute, regardless of the number of Arbitrating Parties, shall be submitted to an arbitral tribunal of three (3) arbitrators appointed by the Appointing Authority.

b) The arbitral tribunal shall be appointed by the Appointing Authority once the time has terminated during which i) any Party is entitled to give a Notice of Arbitration to join any other Party, ii) the BIS is entitled to intervene and (iii) Digimarc, any [**] is entitled to request permission to intervene.

c) The presiding arbitrator of the arbitral tribunal shall be a British national and shall have been admitted to practice as a barrister or solicitor in England and shall also have significant expertise in the resolution of disputes in international commercial matters. All arbitrators shall have a full command of the English language.

d) The arbitrators appointed in accordance with this Arbitration Agreement shall be remunerated in accordance with the provisions of the rules of the [**] in effect at the time any arbitration is commenced.

12. Awards shall be final and binding as from the date the awards are made. The Arbitrating Parties undertake to carry out all awards without delay and waive their right to any form of appeal or recourse to a court of law or other judicial authority, insofar as any such waiver may validly be made. All awards may, if necessary, be enforced by any court having jurisdiction in the same manner as the judgment of any such court.

13. Each Arbitrating Party explicitly agrees hereby that it shall recognise any arbitral award rendered in arbitration under this Arbitration Agreement as final and binding upon it unless a competent arbitral tribunal or a competent judicial authority determines that said Arbitrating Party never received notice of the pendency of the arbitration in which the award was rendered.

14. Any arbitral award rendered under this Arbitration Agreement shall be accorded res judicata effect by any arbitral tribunal appointed under this Arbitration Agreement in regard to those Arbitrating Parties which are bound by an award pursuant to Article 13.

15. The obligations of the Parties to the Agreements shall not be altered or suspended by reason of any arbitration being conducted during the life of any Agreement.

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Schedule G: Arbitration Agreement - 1 January 2013

16. Any Agreement in regard to which a Dispute has arisen shall be governed by the applicable law as specified in that Agreement.

17. This Arbitration Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of the Parties, subject to all Parties respecting Articles 6 and 7 hereto.

18. This Arbitration Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.

19. Any provision of this Arbitration Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

20. This Arbitration Agreement shall enter into full force and effect on 1 January 2013 or such later date on which a Party agrees in writing to be bound by the terms of this Arbitration Agreement and shall continue in full force and effect indefinitely, unless it is terminated by mutual written consent of all of the Parties.

21. This Arbitration Agreement shall be governed by and construed in all respects in accordance with the laws of England, to the exclusion of its rules of conflicts of law.

The Parties have caused this Arbitration Agreement to be executed in multiple copies, with effect from 1 January 2013.

[Signatures]

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Schedule G: Arbitration Agreement - 1 January 2013

Schedule A to Arbitration Agreement

The following are considered to be Agreements:

1. Renewed and Extended Development and License Agreement

2. [**]

3. [**]

4. [**]

5. [**]

6. [**]

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Schedule G: Arbitration Agreement - 1 January 2013

Schedule B to Arbitration Agreement

In accordance with Article 1.1 of the [**] Rules, in addition to such other modifications of the [**] Rules as are contained in this Arbitration Agreement, the Parties to this Arbitration Agreement and to the Agreements modify the [**] Rules as follows:

a) Notwithstanding Article 3.1 of the [**] Rules, a Notice of Arbitration may be given by any Arbitrating Party to multiple parties so as to join said parties into any pending arbitration and this Arbitration Agreement shall allow for multi-party arbitration involving third parties, fourth parties and any further additional parties.

b) Notwithstanding Article 3.2 of the [**] Rules, arbitral proceedings under this Arbitration Agreement shall be deemed to commence on the date on which the Claimant’s Notice of Arbitration is received by the [**].

c) Notwithstanding Article 3.3(g), Article 3.4(a) and Article 3.4(b) of the [**] Rules, the Notice of Arbitration shall not contain a proposal as to the number or appointment or the notification of the appointment of arbitrators (and, if made, any such proposal shall be disregarded).

d) Notwithstanding Article 21.3 of the [**] Rules, any Arbitrating Party must make any counter-claim or claim for the purpose of set-off in its statement of defense and not at a later stage of the arbitral proceedings.

e) Notwithstanding Article 22 of the [**] Rules, the arbitral tribunal shall, in considering whether it is appropriate to allow a party to amend or supplement a written communication (given the interests of economy, efficiency and the desire to avoid the risk of inconsistent awards), have particular regard to the multi-party nature of any arbitration proceeding, the consequences in terms of delay and the objective of resolving related Claims in a single arbitration involving all relevant Parties.

f) Notwithstanding Article 25 of the [**] Rules, in considering whether an extension of a time-limit for the communication of written statements is justified, the arbitral tribunal shall have particular regard to the multi-party nature of any arbitration proceeding and the consequences in terms of delay.

g) Notwithstanding Article 26 of the [**] Rules, no interim measures shall be sought or applied against the BIS in connection with any Dispute by either an arbitral tribunal established pursuant to this Arbitration Agreement or any judicial authority.

**     CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 10    

Schedule G: Arbitration Agreement - 1 January 2013

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors:

Digimarc Corporation

We consent to the incorporation by reference in the registration statement (No. 001-34108) on Form 10 and (No. 333-154524) on Form S-8 of Digimarc Corporation of our reports dated February 22, 2013, with respect to the balance sheets of Digimarc Corporation as of December 31, 2012 and 2011 and the related statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2012, and the effectiveness of internal control over financial reporting as of December 31, 2012, which reports appear in the December 31, 2012 annual report on Form 10-K of Digimarc Corporation.

/s/ KPMG LLP

Portland, Oregon

Date: February 22, 2013

EX-23.2

EXHIBIT 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Digimarc Corporation:

We consent to the incorporation by reference in the registration statements (No. 001-34108) on Form 10 and (No. 333-154524) on Form S-8 of Digimarc Corporation of our report dated February 22, 2013, with respect to the consolidated balance sheets of Digimarc Corporation and subsidiary as of December 31, 2012 and 2011, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2012, which report appears in the December 31, 2012 annual report on Form 10-K/A of Digimarc Corporation.

/s/ KPMG LLP

Portland, Oregon

August 7, 2013

EX-31.3

Exhibit 31.3

DIGIMARC CORPORATION

CERTIFICATION

I, Bruce Davis, certify that:

1. I have reviewed this Amendment No. 1 to annual report on Form 10-K of Digimarc Corporation; and

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2013	By:	/S/    BRUCE DAVIS
		Bruce Davis
		Chief Executive Officer

EX-31.4

Exhibit 31.4

DIGIMARC CORPORATION

CERTIFICATION

I, Michael McConnell, certify that:

1. I have reviewed this Amendment No. 1 to annual report on Form 10-K of Digimarc Corporation; and

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2013	By:	/S/    MICHAEL MCCONNELL
		Michael McConnell
		Chief Financial Officer

EX-32.3

Exhibit 32.3

DIGIMARC CORPORATION

CERTIFICATION

In connection with the Amendment No. 1 to Annual Report of Digimarc Corporation (the “Company”) on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bruce Davis, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the U.S. Code, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: August 7, 2013

By:	/S/    BRUCE DAVIS
	Bruce Davis
	Chief Executive Officer

EX-32.4

Exhibit 32.4

DIGIMARC CORPORATION

CERTIFICATION

In connection with the Amendment No. 1 to Annual Report of Digimarc Corporation (the “Company”) on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael McConnell, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the U.S. Code, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: August 7, 2013

By:	/S/    MICHAEL MCCONNELL
	Michael McConnell
	Chief Financial Officer

XML

Commitments and Contingencies (Details)	12 Months Ended
	Dec. 31, 2012 Case Defendants Patent
Commitments and Contingencies (Textual) [Abstract]
Number of patents	4
Number of defendants	60
Number of case	1

XML

Defined Contribution Pension Plan (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Statement of company made matching contributions
Matching contributions	$ 366	$ 349	$ 323

XML

Joint Venture and Related Party Transactions (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Related Party Transactions
Capital contributions, net	$ 692	$ 2,100	$ 2,800
Revenue	272	2,640	2,723
TVaura LLC [Member]
Related Party Transactions
Capital contributions, net	(104)	1,200	1,600
Revenue		2,640	2,723
TVaura Mobile LLC [Member]
Related Party Transactions
Capital contributions, net	796	900	1,200
Revenue	$ 272

XML

Intangibles

12 Months Ended

Dec. 31, 2012

Intangibles [Abstract]

Intangibles

(11) Intangibles

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Amortization of capitalized patent costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at award date, which varies depending on the pendency period of the application, generally approximating seventeen years.

Amortization of intangible assets acquired is calculated using the straight-line method over the estimated useful lives of the assets.

	Estimated Life (years)		December 31, 2012			December 31, 2011
Capitalized patent costs		17-20	$	3,973		$	3,035
Intangible assets acquired:							—
Purchased patents and intellectual property		3-10		250			13
Existing technology		5		1,560			—
Customer relationships		7		290			—
Backlog		2		760			—
Tradenames		3		290			—
Non-solicitation agreements		1		120			—
Gross intangible assets				7,243			3,048
Accumulated amortization				(522	)		(240	)
Intangible assets, net			$	6,721		$	2,808

The aggregate amortization expense recorded in 2012, 2011 and 2010 was $315, $124 and $79, respectively. For intangible assets recorded at December 31, 2012, the estimated future aggregate amortization expense for the years ending December 31, 2012 through 2017 is approximately:

Year ending December 31:	Amortization Expense
2013	$	1,061
2014		975
2015		572
2016		477
2017		441

XML

Segment Information (Details 1)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
IV [Member]
Customers who accounted for more than 10% of the Company's revenues
Entity wide revenue major customer percentage	30.00%	33.00%	18.00%
Verance Corporation ("Verance") [Member]
Customers who accounted for more than 10% of the Company's revenues
Entity wide revenue major customer percentage	27.00%
Central Banks [Member]
Customers who accounted for more than 10% of the Company's revenues
Entity wide revenue major customer percentage	23.00%	27.00%	30.00%
The Nielsen Company (Nielsen) [Member]
Customers who accounted for more than 10% of the Company's revenues
Entity wide revenue major customer percentage		11.00%	12.00%
Arbitron [Member]
Customers who accounted for more than 10% of the Company's revenues
Entity wide revenue major customer percentage			14.00%

XML

Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Revenue:
Service	$ 10,792	$ 12,395	$ 12,324
License and subscription	33,583	23,644	18,826
Total revenue	44,375	36,039	31,150
Cost of revenue:
Service	5,917	6,638	6,464
License and subscription	591	299	236
Total cost of revenue	6,508	6,937	6,700
Gross profit	37,867	29,102	24,450
Operating expenses:
Sales and marketing	3,827	4,336	3,545
Research, development and engineering	8,741	7,327	5,687
General and administrative	9,457	9,956	7,864
Intellectual property	1,248	1,094	1,203
Total operating expenses	23,273	22,713	18,299
Operating income	14,594	6,389	6,151
Net loss from joint ventures	(1,107)	(2,714)	(2,180)
Interest income, net	179	195	245
Income before income taxes	13,666	3,870	4,216
(Provision) benefit for income taxes	(5,394)	1,786	(42)
Net income	$ 8,272	$ 5,656	$ 4,174
Earnings per common share:
Net income per common share-basic	$ 1.16	$ 0.84	$ 0.59
Net income per common share-diluted	$ 1.12	$ 0.76	$ 0.55
Weighted average common shares outstanding-basic	6,757	6,741	7,120
Weighted average common shares outstanding-diluted	6,989	7,430	7,623
Cash dividends declared per common share	$ 0.33

XML

Acquisition of Attributor Corporation

12 Months Ended

Dec. 31, 2012

Acquisition of Attributor Corporation [Abstract]

Acquisition of Attributor Corporation

(4) Acquisition of Attributor Corporation

On December 3, 2012, Digimarc acquired Attributor pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among Digimarc, DA Sub Inc., a wholly owned subsidiary of Digimarc (“Merger Sub”), Attributor, and Fortis Advisors LLC, as the representative for Attributor’s security holders. In accordance with the terms of the Merger Agreement, Merger Sub merged with and into Attributor (the “Merger”), with Attributor surviving the Merger as a wholly owned subsidiary of Digimarc.

Under the terms of the Merger Agreement, the closing merger consideration to be paid was $5,632 in cash less certain adjustments. The amount of cash paid by Digimarc after adjustments was $5,442. Additionally, $150 of the closing merger consideration was placed into an escrow account and subject to indemnification claims for a period up to 17 months. The Attributor stockholders may also receive up to an additional $900 of cash consideration that is contingent upon meeting certain performance objectives for the fiscal years ending December 31, 2012 and 2013, as set forth in the Merger Agreement. The contingent cash payment, if earned, will be made in March 2014. In addition, certain key employees of Attributor received $1,000 of restricted shares of common stock of Digimarc, issued pursuant to Digimarc’s 2008 Incentive Plan, which vest over a two-year period and are contingent upon continued employment.

The total purchase price is as follows:

Closing merger consideration	$	5,442
Fair value of contingent consideration		190
Total purchase price	$	5,632

The estimated fair value of the contingent consideration of $190 at December 31, 2012 is included in other long-term liabilities on the Consolidated Balance Sheet.

The Company incurred $0.2 million of transaction related expenses associated with the Attributor acquisition during the year ended December 31, 2012, which are reflected in general and administrative expense in the Consolidated Statements of Operations.

Preliminary Purchase Price Allocation

The Company accounted for the transaction using the acquisition method. Under the acquisition method of accounting, total purchase price as shown in the table above is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price was allocated using the information currently available, and Digimarc may adjust the preliminary purchase price allocation after obtaining more information. The final purchase price allocation is pending the completion of our review of the acquired tax assets and liabilities, which is expected to be completed by mid-2013.

The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. The preliminary allocation of the purchase price estimated at the December 3, 2012 acquisition date is as follows:

Total purchase price				$	5,632
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Cash and cash equivalents	$	350
Trade accounts receivable, net		527
Other current assets		18
Property and equipment, net		102
Deferred tax assets		1,225
Accounts payable and other accrued liabilities		(499	)
Deferred revenue		(225	)
Less: Estimated fair value of identifiable intangible assets acquired:
Existing technology		1,560
Customer relationships		290
Backlog		760
Tradenames		290
Non-solicitation agreements		120
Preliminary goodwill				$	1,114

The goodwill is not deductible for tax purposes. Key factors that make up the goodwill created by the transaction include knowledge and experience of the acquired workforce and infrastructure and expected synergies from the combination of operations.

Fair Value of Intangible Assets Acquired

The following table summarizes the estimated fair value of intangible assets acquired, their estimated useful lives and the amortization in the Consolidated Statements of Operations for the year ended December 31, 2012:

	Fair Value		Estimated Life (years)		Amortization Expense
Amortization expense:
Cost of revenue:
Existing technology	$	1,560		5	$	26
Sales and marketing:
Customer relationships		290		7		3
Backlog		760		2		32
Tradenames		290		3		8
General and administrative:
Non-solicitation agreements		120		1		10
Total	$	3,020				79

The fair value of the acquired intangible assets was determined using a discounted cash flow valuation methodology using Level 3 inputs.

The operating results of Attributor are included in the Company’s results of operations since the date of acquisition.

Unaudited Actual and Pro Forma Information

Our consolidated revenues for the year ended December 31, 2012 included $0.2 million from Attributor and our consolidated net income for the year ended December 31, 2012 included a $0.2 million net loss from Attributor subsequent to the acquisition date and without any intercompany allocations. Both revenues and the net loss from Attributor for the year ended December 31, 2012 were negatively impacted by a $0.2 million purchase accounting adjustment.

The following table presents the unaudited pro forma results for the periods set forth below. The unaudited pro forma financial information combines the results of operations as though the acquisition had occurred on January 1, 2011. No pro forma adjustments have been made for our incremental transaction or integration-related costs. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had occurred on January 1, 2011: (in thousands):

	Pro-Forma		Pro-Forma
	Year Ended December 31, 2012		Year Ended December 31, 2011
	(unaudited)		(unaudited)
Revenue	$	49,273	$	39,445
Net income	$	6,807	$	2,265
Net income per common share—basic	$	0.95	$	0.33
Net income per common share—diluted	$	0.92	$	0.30

The pro forma information above includes the following pro forma adjustments that effected net income (in thousands):

	Year Ended December 31, 2012			Year Ended December 31, 2011
	(unaudited)			(unaudited)
Revenue adjustment	$	145		$	(233	)
Amortization expense		(830	)		(950	)
Stock-based compensation expense		(505	)		(505	)
Direct transaction costs		190			(190	)
Income tax benefit		834			1,747
Total impact to net income of pro forma adjustments	$	(166	)	$	(131	)

XML

Subsequent Events

12 Months Ended

Dec. 31, 2012

Subsequent Events [Abstract]

Subsequent Events

(18) Subsequent Events

On February 20, 2013, the Board of Directors declared a quarterly dividend of $0.11 per share, payable on March 11, 2013 to shareholders of record on March 4, 2013.

XML

Property and Equipment (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Operating leases rent expense
Rent expense	$ 776	$ 866	$ 832

XML

Stock-Based Compensation (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Allocation of stock-based compensation
Stock-based compensation expense	$ 5,256	$ 4,216	$ 3,068
Capitalized to patent costs	108	65	37
Total stock-based compensation	5,364	4,281	3,105
Cost of revenue [Member]
Allocation of stock-based compensation
Stock-based compensation expense	603	593	373
Sales and marketing [Member]
Allocation of stock-based compensation
Stock-based compensation expense	409	302	192
Research, development and engineering [Member]
Allocation of stock-based compensation
Stock-based compensation expense	840	560	314
General and administrative [Member]
Allocation of stock-based compensation
Stock-based compensation expense	3,148	2,568	2,083
Intellectual property [Member]
Allocation of stock-based compensation
Stock-based compensation expense	$ 256	$ 193	$ 106

XML

Shareholders' Equity

12 Months Ended

Dec. 31, 2012

Shareholders' Equity/Stock Repurchases [Abstract]

Shareholders' Equity

(12) Shareholders’ Equity

Preferred Stock

In June 2008, the Board of Directors authorized 2,500,000 shares of preferred stock, par value $0.001 per share. The Board of Directors has the authority to issue the undesignated preferred stock in one or more series and to determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued series of undesignated preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by the shareholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of the Company without further action by shareholders and may adversely affect the voting and other rights of the holders of common stock.

The Board of Directors authorized 10,000 shares of Series A Redeemable Nonvoting Preferred stock (“Series A Preferred”) that were issued to certain executive officers at the time of formation. The Series A Preferred has no voting rights, except as required by law, and may be redeemed at the option of the Company’s Board of Directors at any time on or after June 18, 2013.

The Series A Preferred is redeemable based on the stated fair value of $5.00 per share. The Series A Preferred has no dividend rights and no rights to the undistributed earnings of the Company.

Common Stock

In June 2008, the Board of Directors authorized 50,000,000 shares of common stock, par value $0.001 per share. The holders of Digimarc common stock are entitled to one vote for each share held of record on all matters submitted to a vote of our shareholders, including the election of directors. Subject to preferences that may be granted to any then outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends as may be declared by the Board of Directors out of funds legally available for such purpose, as well as any distributions to the Company’s shareholders. The Series A Preferred does not have any dividend preferences. In the event of the Company’s liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all of the Company’s assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock. Holders of common stock have no preemptive or other subscription or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and non-assessable.

Stock Incentive Plan

On July 31, 2008 the Company’s Board of Directors initially adopted the 2008 Incentive Plan, or the 2008 Plan. The 2008 Plan provides for the grant of stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance shares, performance units, and cash-based awards, which may be granted to officers, directors, employees, consultants, agents, advisors and independent contractors who provide services to the Company and its affiliated companies.

The 2008 Plan authorizes the issuance of up to 2,500,000 shares of common stock. The shares authorized under the 2008 Plan are subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar event. Shares issued under the 2008 Plan will consist of authorized and unissued shares or shares held by the Company as treasury shares. If an award granted under the 2008 Plan lapses, expires, terminates or is forfeited or surrendered without having been fully exercised or without the issuance of all the shares subject to the award, the shares covered by that award will again be available for use under the 2008 Plan. Shares that are (i) tendered by a participant or retained by the Company as payment for the purchase price of an award or to satisfy tax withholding obligations or (ii) covered by an award that is settled in cash, or in some manner that some or all of the shares covered by the award are not issued, will be available for issuance under the 2008 Plan. In addition, awards granted as substitute awards in connection with acquisition transactions will not reduce the number of shares authorized for issuance under the 2008 Plan.

Stock Options

As of December 31, 2012, under all of the Company’s stock-based compensation plans, equity awards to purchase an additional 799,415 shares were authorized for future grants under the plans. The Company issues new shares upon option exercises.

Options granted, exercised, canceled and expired under the stock incentive plan are summarized as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Options outstanding, December 31, 2009		1,167,323		$	9.65	$	6.28
Granted		140,000		$	15.64	$	8.28
Exercised		(313,832	)	$	9.70	$	6.32
Canceled		—			—		—
Options outstanding, December 31, 2010		993,491		$	10.47	$	6.55
Granted		215,000		$	27.84	$	11.46
Exercised		(169,420	)	$	9.75	$	6.33
Canceled		(10,833	)	$	9.64	$	6.28
Options outstanding, December 31, 2011		1,028,238		$	14.23	$	7.61
Granted		—			—		—
Exercised		(172,250	)	$	9.64	$	6.29
Canceled		—			—		—
Options outstanding, December 31, 2012		855,988		$	15.16	$	7.88	$	6,280
Options exercisable, December 31, 2012		693,248		$	12.78			$	6,110
Options unvested, December 31, 2012		162,740		$	25.28			$	170

The aggregate intrinsic value is based on the closing price of $20.70 per share of Digimarc common stock on December 31, 2012, which would have been received by the optionees had all of the options with exercise prices less than $20.70 per share been exercised on that date.

The following table summarizes information about stock options outstanding at December 31, 2012:

	Options Outstanding						Options Exercisable
Exercise Price	Number Outstanding		Remaining Contractual Life (Years)		Weighted Average Price		Number Exercisable		Remaining Contractual Life (Years)		Weighted Average Price
$9.64 – $9.91		508,072		5.86	$	9.66		508,072		5.86	$	9.66
$14.99 – $18.01		132,916		7.08	$	15.67		103,126		7.10	$	15.87
$24.35 – $30.01		215,000		8.57	$	27.84		82,050		8.49	$	28.26
$9.64 – $30.01		855,988		6.73	$	15.16		693,248		6.36	$	12.78

Restricted Stock

The Compensation Committee of the Board of Directors awarded restricted stock shares under the Company’s 2008 Plan to certain employees. The shares subject to the restricted stock awards will vest over a certain period, usually four years, following the date of the grant. Specific terms of the restricted stock awards are governed by Restricted Stock Agreements between the Company and the award recipients.

The following table reconciles the unvested balance of restricted stock:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, December 31, 2009		111,000		$	10.02
Granted		124,560		$	16.77
Vested		(34,350	)	$	9.89
Canceled		(3,450	)	$	13.05
Unvested balance, December 31, 2010		197,760		$	14.25
Granted		190,180		$	29.12
Vested		(73,110	)	$	20.82
Canceled		(18,120	)	$	19.24
Unvested balance, December 31, 2011		296,710		$	21.51
Granted		202,340		$	22.51
Vested		(117,667	)	$	22.52
Canceled		(12,300	)	$	22.05
Unvested balance, December 31, 2012		369,083		$	21.72

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Stock Repurchases (Details)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Summary of common stock shares repurchased
Private transaction		552,536
Repurchase program	50,900	104,577
Exercise of stock options	69,272	48,432	102,077
Tax withholding obligations on stock options	39,005	46,401	81,610
Tax withholding obligations on restricted shares	42,785	24,953	13,506
Total	201,962	766,899	197,193

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Acquisition of Attributor Corporation (Details 3) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Pro-forma financial information presented for informational purposes
Revenue	$ 49,273	$ 39,445
Net income	$ 6,807	$ 2,265
Net income per common share -basic	$ 0.95	$ 0.33
Net income per common share-diluted	$ 0.92	$ 0.30

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Joint Ventures and Related Party Transactions (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended	48 Months Ended		1 Months Ended	36 Months Ended		1 Months Ended	36 Months Ended
	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Apr. 30, 2012 TVaura LLC [Member]	Dec. 31, 2011 TVaura LLC [Member]	Dec. 31, 2012 TVaura LLC [Member]	Apr. 30, 2012 TVaura Mobile LLC [Member]	Dec. 31, 2011 TVaura Mobile LLC [Member]	Dec. 31, 2012 TVaura Mobile LLC [Member]
Joint Ventures and Related Party Transactions (Textual) [Abstract]
Equity Method Investment, Ownership Percentage						51.00%			49.00%
One-time severance and suspension costs	$ 500
Net payment of operating expenses and suspension related costs							796
Operating expenses and suspension related costs returned				104
Investments in joint ventures		0	415
Nielsen agreed to License agreement pay		18,750
Technical and development services to the joint ventures		6,848
Initial cash contributions aggregating					$ 3,500			$ 2,500

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Stock-Based Compensation (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Unrecognized compensation cost related to non-vested stock-based awards granted
Unrecognized compensation costs	$ 8,333	$ 9,463	$ 6,212

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Components of tax expense (benefit) allocated to continuing operations

Components of tax expense (benefit) allocated to continuing operations include the following:

	Year Ended December 31, 2012		Year Ended December 31, 2011			Year Ended December 31, 2010
Current:
Federal	$	4,699	$	1,066		$	—
State		570		3			—
Foreign		1		(20	)		42
Sub-total		5,270		1,049			42
Deferred:
Federal		97		(2,470	)		—
State		27		(365	)		—
Foreign		—		—			—
Sub-total		124		(2,835	)		—
Total tax (benefit) expense	$	5,394	$	(1,786	)	$	42

Reconciliation of the statutory federal income tax rate to the Company's effective income tax rate

The reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:

	Year Ended December 31, 2012			%			Year Ended December 31, 2011			%			Year Ended December 31, 2010			%
Income taxes computed at statutory rates	$	4,647			34	%	$	1,316			34	%	$	1,434			34	%
Increases (decreases) resulting from:
State income taxes, net of federal tax benefit		705			5	%		194			5	%		220			5	%
Federal and state research and experimentation credits		(122	)		(1	)%		(784	)		(20	)%		(353	)		—
Change in valuation allowance		12			—			(2,581	)		(67	)%		(1,275	)		(32	)%
Transaction costs		65			1	%		—			—			—			—
Impact of federal graduated rates		39			—			—			—			—			—
Other		48			—			69			2	%		16			—
Total	$	5,394			39	%	$	(1,786	)		(46	)%	$	42			7	%

Tax effects of significant items comprising the Company's deferred tax assets and deferred tax liabilities

The tax effects of significant items comprising the Company’s deferred tax assets and deferred tax liabilities are as follows:

	December 31, 2012			December 31, 2011
Deferred tax assets:
Stock based compensation	$	2,636		$	1,976
Federal and state net operating losses		1,900			—
Goodwill		1,146			1,254
Accrued compensation		50			—
Deferred rent		170			190
Federal and state research and experimentation credits		—			458
Other		—			21
Total gross deferred tax assets		5,902			3,899
Less valuation allowance		(184	)		—
Net deferred tax assets	$	5,718		$	3,899
Deferred tax liabilities:
Patent expenditures	$	(1,385	)	$	(1,051	)
Fixed asset differences		(167	)		(13	)
Intangible asset differences		(506	)		(13	)
Other		(18	)		(13	)
Total deferred tax liabilities	$	(2,076	)	$	(1,064	)
Net deferred tax assets	$	3,642		$	2,835

Summary of reconciliation of the Company's uncertain tax positions

A summary reconciliation of the Company’s uncertain tax positions is as follows:

	December 31, 2012		December 31, 2011
Beginning balance	$	102	$	—
Addition for current year tax positions		6		30
Addition for prior year tax positions		—		72
Settlements with taxing authorities		—		—
Lapsing of statutes of limitations		—		—
Ending balance	$	108	$	102

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Description of Business and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2012

Description of Business and Summary of Significant Accounting Policies [Abstract]

Summary of fair value hierarchy for financial assets

The Company’s fair value hierarchy for its cash equivalents and marketable securities as of December 31, 2012 and 2011, respectively, was as follows:

December 31, 2012	Level 1		Level 2		Level 3		Total
Money market securities	$	901	$	—	$	—	$	901
Certificates of deposits		—		491		—		491
U.S. treasuries		—		289		—		289
U.S. federal agency notes		—		1,637		—		1,637
Pre-refunded and other municipals		—		22,036		—		22,036
Corporate notes		—		10,100		—		10,100
Commercial paper		—		2,614		—		2,614
Total	$	901	$	37,167	$	—	$	38,068

December 31, 2011	Level 1		Level 2		Level 3		Total
Money market securities	$	896	$	—	$	—	$	896
Certificates of deposits		—		736		—		736
U.S. treasuries		—		718		—		718
U.S. federal agency notes		—		7,942		—		7,942
Pre-refunded and other municipals		—		2,800		—		2,800
Corporate notes		—		16,459		—		16,459
Commercial paper		—		3,400		—		3,400
Total	$	896	$	32,055	$	—	$	32,951

Summary of fair value maturities for financial asset

The fair value maturities of the Company’s cash equivalents and marketable securities as of December 31, 2012 are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5-10 years		More than 10 years
Maturities	$	38,068	$	31,200	$	6,868	$	—	$	—

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Description of Business and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

Description of Business and Summary of Significant Accounting Policies [Abstract]

Description of Business

Description of Business

Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, enables governments and enterprises around the world to give digital identities to media and objects that computers can sense and recognize and to which they can react. The Company’s inventions provide the means to infuse persistent digital information, perceptible only to computers and digital devices, into all forms of media content. The unique digital identifier placed in media generally persists with it regardless of the distribution path and whether it is copied, manipulated or converted to a different format, and does not affect the quality of the content or the enjoyment or other traditional uses of it. The Company’s technology permits computers and digital devices to quickly and reliably identify relevant data from vast amounts of media content.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Digimarc and its wholly-owned subsidiary. All intercompany transactions and balances have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires Digimarc to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Certain of the Company’s accounting policies require higher degrees of judgment than others in their application. These include revenue recognition on long-term license and service contracts, goodwill, impairments and estimation of useful lives of long-lived assets, contingencies and litigation, patent costs, stock-based compensation and income taxes. Digimarc bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Reclassifications

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Cash Equivalents

Cash Equivalents

The Company considers all highly liquid marketable securities with original maturities of 90 days or less at the date of acquisition to be cash equivalents. Cash equivalents include money market funds, certificates of deposit, commercial paper, and pre-refunded municipal bonds totaling $5,878 and $2,992 at December 31, 2012 and 2011, respectively. Cash equivalents are carried at cost or amortized cost, which approximates market.

Marketable Securities

Marketable Securities

The Company considers all investments with original maturities over 90 days that mature in less than one year from the balance sheet date to be short-term marketable securities. Both short- and long-term marketable securities primarily include U.S. federal agency notes, U.S. treasuries, corporate notes, pre-refunded municipal bonds, and commercial paper. The Company’s marketable securities are classified as held-to-maturity and are reported at amortized cost, which approximates market.

A decline in the market value of any security below amortized cost that is deemed to be other-than-temporary results in a reduction in the carrying amount. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating that the cost of the investment is recoverable outweighs evidence to the contrary. There have been no other-than-temporary impairments identified or recorded by the Company.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using a method that approximates the effective interest method. Under this method, dividend and interest income are recognized when earned.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Accounting Standards Certification (“ASC”) 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the U.S., and enhances disclosures about fair value measurements. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

• Level 1—Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date.

• Level 2—Pricing inputs are quoted for similar investments, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.

• Level 3—Pricing inputs are unobservable for the investment; that is, the inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The estimated fair values of the Company’s financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate their carrying values due to the short-term nature of these instruments. The Company records marketable securities at amortized cost, which approximates fair value.

The Company’s fair value hierarchy for its cash equivalents and marketable securities as of December 31, 2012 and 2011, respectively, was as follows:

December 31, 2012	Level 1		Level 2		Level 3		Total
Money market securities	$	901	$	—	$	—	$	901
Certificates of deposits		—		491		—		491
U.S. treasuries		—		289		—		289
U.S. federal agency notes		—		1,637		—		1,637
Pre-refunded and other municipals		—		22,036		—		22,036
Corporate notes		—		10,100		—		10,100
Commercial paper		—		2,614		—		2,614
Total	$	901	$	37,167	$	—	$	38,068

December 31, 2011	Level 1		Level 2		Level 3		Total
Money market securities	$	896	$	—	$	—	$	896
Certificates of deposits		—		736		—		736
U.S. treasuries		—		718		—		718
U.S. federal agency notes		—		7,942		—		7,942
Pre-refunded and other municipals		—		2,800		—		2,800
Corporate notes		—		16,459		—		16,459
Commercial paper		—		3,400		—		3,400
Total	$	896	$	32,055	$	—	$	32,951

The fair value maturities of the Company’s cash equivalents and marketable securities as of December 31, 2012 are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5-10 years		More than 10 years
Maturities	$	38,068	$	31,200	$	6,868	$	—	$	—

Concentrations of Business and Credit Risk

Concentrations of Business and Credit Risk

A significant portion of the Company’s business depends on a limited number of large contracts. The loss of any large contract may result in loss of revenue and margin on a prospective basis. Financial instruments that potentially subject Digimarc to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and trade accounts receivable. Digimarc places its cash and cash equivalents with major banks and financial institutions and at times deposits may exceed insured limits. Other than cash used for operating needs, which may include short-term marketable securities with the Company’s principal banks, Digimarc’s investment policy limits its credit exposure to any one financial institution or type of financial instrument by limiting the maximum of 5% of its cash equivalents and marketable securities or $1,000, whichever is greater, to be invested in any one issuer except for the U.S. government, U.S. federal agencies and U.S. backed securities, which have no limits, at the time of purchase. The Company’s investment policy also limits its credit exposure by limiting the maximum of 40% of its cash and cash equivalents and marketable securities, or $15,000, whichever is greater, to be invested in any one industry category, (e.g., financial or energy industries), at the time of purchase. As a result, Digimarc’s credit risk associated with cash and cash equivalents and marketable securities is believed to be minimal.

Equity Method Investments

Equity Method Investments

The Company accounts for its joint ventures under the equity method of accounting pursuant to ASC 323 “Investments – Equity Method and Joint Ventures.” Under the equity method, investments are carried at cost, plus or minus the Company’s proportionate share, based on present ownership interests, of: (a) the investee’s profit or loss after the date of acquisition; (b) changes in the Company’s equity that have not been recognized in the investee’s profit or loss; and (c) certain other adjustments. Distributions received from the investee (such as dividends) reduce the carrying amount of the investment.

Goodwill

Goodwill

The Company accounts for business combinations under the acquisition method of account in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.

Contingent consideration is recorded at the acquisition date based upon the estimated fair value of the contingent payments. The fair value of the contingent consideration is re-measured each reporting period with any adjustments in fair value being recognized in earnings from operations.

The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company reviews goodwill in June of each year, or on an interim basis if required, for impairment to determine if events or changes in business conditions indicate that the carrying value of the goodwill may not be recoverable. Such reviews assess the fair value of the assets compared to the carrying values.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of ASC 360 “Property, Plant and Equipment.” This statement requires that long-lived assets, including definite-lived intangible assets, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset over its remaining useful life. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Through December 31, 2012, there have been no such impairment losses.

Research and Development

Research and Development

Research and development costs are expensed as incurred in accordance with ASC 730 “Research and Development.”

Software Development Costs

Software Development Costs

Under ASC 985 “Software,” software development costs are to be capitalized beginning when a product’s technological feasibility has been established and ending when a product is made available for general release to customers. To date, the establishment of technological feasibility of the Company’s products has occurred shortly before general release and, therefore, software development costs qualifying for capitalization have been immaterial. Accordingly, the Company has not capitalized any software development costs and has charged all such costs to research and development expense.

Patent Costs

Patent Costs

Costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at award date, which varies depending on the pendency period of the application, generally approximating seventeen years. Capitalized patent costs, also referred to as patent prosecution costs, include internal legal labor, professional legal fees, government filing fees and translation fees related to obtaining the Company’s patent portfolio.

Costs associated with the maintenance and annuity fees of patents are accounted for as prepaid assets at the time of payment and amortized over the shorter of the maintenance period or remaining life of the related patent.

Revenue Recognition

Revenue Recognition

See Note 3 for detail disclosures of the Company’s revenue recognition policy.

Stock-Based Compensation

Stock-Based Compensation

ASC 718 “Compensation – Stock Compensation” requires the measurement and recognition of compensation for all stock-based awards made to employees and directors including stock options and restricted stock based on estimated fair values.

For stock option awards the Company uses the Black-Scholes option pricing model as its method of valuation. The Company’s determination of the fair value on the date of grant is affected by its stock price as well as assumptions regarding a number of highly subjective variables. These variables include, but are not limited to, the expected life of the award, the Company’s expected stock price volatility over the term of the award, the risk-free interest rate and the expected dividend yield. Although the fair value of stock-based awards is determined in accordance with ASC 718 and SAB No. 107 “Shared-Based Payment,” the Black-Scholes option pricing model requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results.

Income Taxes

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred income taxes reflect the future tax consequences of differences between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not expected to be realized.

The Company is subject to federal and state income taxes within the U.S. and in the ordinary course of business, there are transactions and calculations where the ultimate tax determination is uncertain. The Company is also subject to withholding taxes in various foreign jurisdictions. The withholding taxes are computed by the customers and paid to foreign jurisdictions on our behalf. The Company reports a liability (or contra asset) for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to the unrecognized tax benefits in income tax expense.

Intangibles - Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, “Intangibles – Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment,” to allow entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying value. Otherwise, the quantitative impairment test is not required. ASU No. 2012-2 is effective for impairment tests for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The Company has adopted the provisions of this standard and noted no material impact on the financial condition or results of operations of the Company.

Earnings Per Share

The Company calculates basic and diluted earnings per common share in accordance with ASC 260 “Earnings Per Share,” using the two-class method as the Company’s unvested restricted stock is a participating security given these awards contain non-forfeitable rights to receive dividends. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed.

Contingencies

Certain of the Company’s product license and services agreements include an indemnification provision for claims from third parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASC 450 “Contingencies.” To date, there have been no claims made under such indemnification provisions.

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Acquisition of Attributor Corporation (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Preliminary allocation of total purchase price
Total purchase price	$ 5,632
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Cash and cash equivalents	350
Trade accounts receivable, net	527
Other current assets	18
Property and equipment, net	102
Deferred tax assets	1,225
Accounts payable and other accrued liabilities	(499)
Deferred revenue	(225)
Preliminary goodwill	1,114
Existing technology [Member]
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Estimated fair value of identifiable intangible assets acquired	1,560
Customer relationships [Member]
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Estimated fair value of identifiable intangible assets acquired	290
Backlog [Member]
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Estimated fair value of identifiable intangible assets acquired	760
Tradenames [Member]
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Estimated fair value of identifiable intangible assets acquired	290
Non-solicitation agreements [Member]
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Estimated fair value of identifiable intangible assets acquired	$ 120

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Intangibles (Tables)

12 Months Ended

Dec. 31, 2012

Intangibles [Abstract]

Amortization of intangible assets acquired

	Estimated Life (years)		December 31, 2012			December 31, 2011
Capitalized patent costs		17-20	$	3,973		$	3,035
Intangible assets acquired:							—
Purchased patents and intellectual property		3-10		250			13
Existing technology		5		1,560			—
Customer relationships		7		290			—
Backlog		2		760			—
Tradenames		3		290			—
Non-solicitation agreements		1		120			—
Gross intangible assets				7,243			3,048
Accumulated amortization				(522	)		(240	)
Intangible assets, net			$	6,721		$	2,808

Estimated future aggregate amortization expense

For intangible assets recorded at December 31, 2012, the estimated future aggregate amortization expense for the years ending December 31, 2012 through 2017 is approximately:

Year ending December 31:	Amortization Expense
2013	$	1,061
2014		975
2015		572
2016		477
2017		441

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Quarterly Financial Information-Unaudited (Tables)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information-Unaudited [Abstract]

Quarterly Financial Information (Unaudited)

Quarter ended:	March 31			June 30			September 30			December 31
2012
Service revenue	$	3,048		$	2,609		$	2,616		$	2,519
License and subscription revenue		13,998			6,503			6,287			6,795
Total revenue		17,046			9,112			8,903			9,314
Total cost of revenue		1,810			1,583			1,467			1,648
Gross profit		15,236			7,529			7,436			7,666
Gross profit percent, service revenue		44	%		44	%		48	%		45	%
Gross profit percent, license and subscription revenue		99	%		98	%		98	%		96	%
Gross profit percent, total		89	%		83	%		84	%		82	%
Sales and marketing	$	1,007		$	970		$	937		$	913
Research, development and engineering		1,998			2,146			2,320			2,277
General and administrative		2,758			2,191			2,282			2,226
Intellectual property		319			291			309			329
Operating income		9,154			1,931			1,588			1,921
Net income		4,999			1,216			1,003			1,054
Earnings per common share:
Net income per common share—basic	$	0.74		$	0.17		$	0.14		$	0.15
Net income per common share—diluted	$	0.70		$	0.17		$	0.14		$	0.14
Weighted average common shares outstanding—basic		6,738			6,737			6,761			6,791
Weighted average common shares outstanding—diluted		7,140			6,993			6,984			6,966

Quarter ended:	March 31			June 30			September 30			December 31
2011
Service revenue	$	3,069		$	3,165		$	3,108		$	3,053
License and subscription revenue		6,022			6,308			5,442			5,872
Total revenue		9,091			9,473			8,550			8,925
Total cost of revenue		1,649			1,690			1,742			1,856
Gross profit		7,442			7,783			6,808			7,069
Gross profit percent, service revenue		48	%		49	%		46	%		42	%
Gross profit percent, license and subscription revenue		99	%		99	%		99	%		99	%
Gross profit percent, total		82	%		82	%		80	%		79	%
Sales and marketing	$	1,102		$	1,017		$	1,166		$	1,051
Research, development and engineering		1,775			1,884			1,958			1,710
General and administrative		2,847			2,270			2,000			2,839
Intellectual property		301			266			259			268
Operating income		1,417			2,346			1,425			1,201
Net income		938			3,626			639			453
Earnings per common share:
Net income per common share—basic	$	0.14		$	0.54		$	0.10		$	0.07
Net income per common share—diluted	$	0.12		$	0.50		$	0.09		$	0.06
Weighted average common shares outstanding—basic		6,864			6,696			6,706			6,699
Weighted average common shares outstanding—diluted		7,505			7,245			7,344			7,279

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Acquisition of Attributor Corporation (Details 4) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Pro forma adjustments that effected net income
Revenue adjustment	$ 145	$ (233)
Amortization expense	(830)	(950)
Stock-based compensation expense	(505)	(505)
Direct transaction costs	190	(190)
Income tax benefit	834	1,747
Total impact to net income of pro forma adjustments	$ (166)	$ (131)

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Net Income Per Common Share (Tables)

12 Months Ended

Dec. 31, 2012

Net Income Per Common Share [Abstract]

Summary of reconciliation of earnings per common share

The following table reconciles earnings per common share for the year ended December 31, 2012:

	Year Ended December 31, 2012
Basic EPS:
Net income	$	8,272
Less: Net income allocable to participating securities		(426	)
Net income allocable to common shares	$	7,846
Weighted average common shares outstanding – basic (in thousands)		6,757
Basic earnings per common share	$	1.16

	Year Ended December 31, 2012
Diluted EPS:
Net income	$	8,272
Less: Net income allocable to participating securities		(426	)
Net income allocable to common shares	$	7,846
Weighted average common shares outstanding – basic (in thousands)		6,757
Dilutive effect of non-participating securities (in thousands)		232
Weighted average common shares outstanding – dilutive (in thousands)		6,989
Diluted earnings per common share	$	1.12

Reconciliation of Basic and Diluted Earnings Per Share

	Year Ended December 31, 2011						Year Ended December 31, 2010
	Income (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount		Income (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount
Basic EPS
Income available to common shareholders	$	5,656		6,741	$	0.84	$	4,174		7,120	$	0.59
Effect of Dilutive Securities
Options				393						440
Restricted stock				296						63
Diluted EPS
Income available to common shareholders	$	5,656		7,430	$	0.76	$	4,174		7,623	$	0.55

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Trade Accounts Receivable and Allowance for Doubtful Accounts (Details 1)	Dec. 31, 2012	Dec. 31, 2011
Central Banks [Member]
Customers who accounted for more than 10% of accounts receivable
Percentage of accounts receivable of major customers	30.00%	45.00%
Nielsen [Member]
Customers who accounted for more than 10% of accounts receivable
Percentage of accounts receivable of major customers	24.00%	29.00%
Civolution [Member]
Customers who accounted for more than 10% of accounts receivable
Percentage of accounts receivable of major customers	14.00%	14.00%

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Shareholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Summary of options granted, exercised, canceled and expired
Outstanding at beginning	1,028,238	993,491	1,167,323
Options, granted		215,000	140,000
Options, exercised	(172,250)	(169,420)	(313,832)
Options canceled		(10,833)
Outstanding at ending	855,988	1,028,238	993,491
Exercisable at ending	693,248
Unvested at ending	162,740
Weighted Average Exercise Price at beginning	$ 14.23	$ 10.47	$ 9.65
Weighted Average Exercise Price Options, granted		$ 27.84	$ 15.64
Weighted Average Exercise Price Options, exercised	$ 9.64	$ 9.75	$ 9.70
Weighted Average Exercise Price Options canceled		$ 9.64
Weighted Average Exercise Price at ending	$ 15.16	$ 14.23	$ 10.47
Weighted Average Exercise Exercisable at ending	$ 12.78
Weighted Average Exercise Unvested at ending	$ 25.28
Weighted Average Grant Date Fair Value at beginning	$ 7.61	$ 6.55	$ 6.28
Weighted Average Grant Date Fair Value Options, granted		$ 11.46	$ 8.28
Weighted Average Grant Date Fair Value Options, exercised	$ 6.29	$ 6.33	$ 6.32
Weighted Average Grant Date Fair Value Options canceled		$ 6.28
Weighted Average Grant Date Fair Value at ending	$ 7.88	$ 7.61	$ 6.55
Aggregate Intrinsic Value Outstanding at ending	$ 6,280
Aggregate Intrinsic Value Exercisable at ending	6,110
Aggregate Intrinsic Value Unvested at ending	$ 170

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Trade Accounts Receivable and Allowance for Doubtful Accounts (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Trade accounts receivable are recorded at the invoiced amount
Trade accounts receivable	$ 4,216	$ 3,502
Allowance for doubtful accounts
Trade accounts receivable, net	4,216	3,502
Unpaid deferred revenues included in accounts receivable	$ 1,589	$ 2,084

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Description of Business and Summary of Significant Accounting Policies (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Description of Business and Summary of Significant Accounting Policies (Textual) [Abstract]
Highly liquid marketable securities with original maturities	90 days
Cash equivalents include money market funds, certificates of deposit, commercial paper, and investments in pre-refunded municipal bonds	$ 5,878	$ 2,992
Short term marketable securities maturity description	Over 90 days that mature in less than one year
Credit exposure to any one financial institution or type of financial instrument	5% of its cash equivalents and marketable securities or $1,000, whichever is greater
Percentage of credit exposure to any one financial institution or type of financial instrument	5.00%
Maximum amount of Credit exposure to any one financial institution or type of financial instrument	1,000
Credit exposure limits of cash and cash equivalents and marketable securities	40% of its cash and cash equivalents and marketable securities, or $15,000, whichever is greater
Percentage of credit exposure limits based on cash and cash equivalents and marketable securities	40.00%
Credit exposure limits of cash and cash equivalents and marketable securities under option two	$ 15,000
Term of patent	17 years
Purchase price adjustment date	1 year

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Intangibles (Details) (USD $) In Thousands, unless otherwise specified					12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Purchased patents and intellectual property [Member]	Dec. 31, 2011 Purchased patents and intellectual property [Member]	Dec. 31, 2012 Purchased patents and intellectual property [Member] Maximum [Member]	Dec. 31, 2012 Purchased patents and intellectual property [Member] Minimum [Member]	Dec. 31, 2012 Existing technology [Member]	Dec. 31, 2012 Customer relationships [Member]	Dec. 31, 2012 Backlog [Member]	Dec. 31, 2012 Tradenames [Member]	Dec. 31, 2012 Non-solicitation agreements [Member]
Amortization of intangible assets acquired
Capitalized patent costs	$ 3,973	$ 3,035
Intangible assets acquired
Estimated Useful life					10 years	3 years	5 years	7 years	2 years	3 years	1 year
Intangible assets amount	3,020		250	13			1,560	290	760	290	120
Gross intangible assets	7,243	3,048
Accumulated amortization	(522)	(240)
Intangible assets, net	$ 6,721	$ 2,808

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Quarterly Financial Information-Unaudited

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information-Unaudited [Abstract]

Quarterly Financial Information-Unaudited

(19) Quarterly Financial Information—Unaudited

Quarter ended:	March 31			June 30			September 30			December 31
2012
Service revenue	$	3,048		$	2,609		$	2,616		$	2,519
License and subscription revenue		13,998			6,503			6,287			6,795
Total revenue		17,046			9,112			8,903			9,314
Total cost of revenue		1,810			1,583			1,467			1,648
Gross profit		15,236			7,529			7,436			7,666
Gross profit percent, service revenue		44	%		44	%		48	%		45	%
Gross profit percent, license and subscription revenue		99	%		98	%		98	%		96	%
Gross profit percent, total		89	%		83	%		84	%		82	%
Sales and marketing	$	1,007		$	970		$	937		$	913
Research, development and engineering		1,998			2,146			2,320			2,277
General and administrative		2,758			2,191			2,282			2,226
Intellectual property		319			291			309			329
Operating income		9,154			1,931			1,588			1,921
Net income		4,999			1,216			1,003			1,054
Earnings per common share:
Net income per common share—basic	$	0.74		$	0.17		$	0.14		$	0.15
Net income per common share—diluted	$	0.70		$	0.17		$	0.14		$	0.14
Weighted average common shares outstanding—basic		6,738			6,737			6,761			6,791
Weighted average common shares outstanding—diluted		7,140			6,993			6,984			6,966

Quarter ended:	March 31			June 30			September 30			December 31
2011
Service revenue	$	3,069		$	3,165		$	3,108		$	3,053
License and subscription revenue		6,022			6,308			5,442			5,872
Total revenue		9,091			9,473			8,550			8,925
Total cost of revenue		1,649			1,690			1,742			1,856
Gross profit		7,442			7,783			6,808			7,069
Gross profit percent, service revenue		48	%		49	%		46	%		42	%
Gross profit percent, license and subscription revenue		99	%		99	%		99	%		99	%
Gross profit percent, total		82	%		82	%		80	%		79	%
Sales and marketing	$	1,102		$	1,017		$	1,166		$	1,051
Research, development and engineering		1,775			1,884			1,958			1,710
General and administrative		2,847			2,270			2,000			2,839
Intellectual property		301			266			259			268
Operating income		1,417			2,346			1,425			1,201
Net income		938			3,626			639			453
Earnings per common share:
Net income per common share—basic	$	0.14		$	0.54		$	0.10		$	0.07
Net income per common share—diluted	$	0.12		$	0.50		$	0.09		$	0.06
Weighted average common shares outstanding—basic		6,864			6,696			6,706			6,699
Weighted average common shares outstanding—diluted		7,505			7,245			7,344			7,279

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Cash flows from operating activities:
Net income/loss	$ 8,272	$ 5,656	$ 4,174
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment	600	613	565
Amortization and write-off of intangibles	385	143	79
Stock-based compensation	5,256	4,216	3,068
Net loss from joint ventures	1,107	2,714	2,180
Deferred income taxes	(284)	(3,640)
Tax benefit from stock-based awards	3,688	1,873
Excess tax benefit from stock-based awards	(3,044)	(1,068)
Changes in operating assets and liabilities:
Trade accounts receivable, net	(187)	(21)	89
Other current assets	219	240	(473)
Other assets	201	107	(32)
Accounts payable and other liabilities	(228)	(668)	507
Deferred revenue	(384)	88	275
Net cash provided by operating activities	15,601	10,253	10,432
Cash flows from investing activities:
Purchase of property and equipment	(570)	(678)	(781)
Capitalized patent costs and purchased intellectual property	(1,170)	(712)	(914)
Investments in joint ventures, net	(692)	(2,100)	(2,800)
Business acquisitions, net of cash acquired	(5,092)
Sale or maturity of marketable securities	144,214	74,689	122,176
Purchase of marketable securities	(146,444)	(65,044)	(127,878)
Net cash provided by (used in) investing activities	(9,754)	6,155	(10,197)
Cash flows from financing activities:
Issuance of common stock	1,660	1,651	3,045
Purchase of common stock	(4,760)	(22,048)	(5,824)
Cash dividends paid	(2,344)
Excess tax benefit from stock-based awards	3,044	1,068
Net cash used in financing activities	(2,400)	(19,329)	(2,779)
Net increase (decrease) in cash and cash equivalents	3,447	(2,921)	(2,544)
Cash and cash equivalents at beginning of period	3,419	6,340	8,884
Cash and cash equivalents at end of period	6,866	3,419	6,340
Supplemental disclosure of cash flow information:
Cash paid for income taxes	1,819	13	42
Supplemental disclosure of non-cash investing activities:
Stock-based compensation capitalized to patent costs	108	65	37
Supplemental schedule of non-cash financing activities:
Exercise of stock options	$ 1,660	$ 1,651	$ 3,045

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Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

(2) Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, “Intangibles – Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment,” to allow entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying value. Otherwise, the quantitative impairment test is not required. ASU No. 2012-2 is effective for impairment tests for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The Company has adopted the provisions of this standard and noted no material impact on the financial condition or results of operations of the Company.

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Patent Licensing Arrangement with Intellectual Ventures

12 Months Ended

Dec. 31, 2012

Patent Licensing Arrangement with Intellectual Ventures [Abstract]

Patent Licensing Arrangement with Intellectual Ventures

(5) Patent Licensing Arrangement with Intellectual Ventures

On October 5, 2010, the Company entered into a patent licensing arrangement with IV Digital Multimedia Inventions, LLC, a Delaware limited liability company affiliated with Intellectual Ventures (“IV”), pursuant to which the Company granted an exclusive license to sublicense, subject to pre-existing encumbrances and a grant-back license, 597 patents and 288 patent applications held by the Company.

The Company also assigned to IV the related causes of action and other enforcement rights and IV has the sole right, but not the obligation, to prepare, file, prosecute, maintain, defend and enforce the licensed patents at its expense. IV may at any time abandon its license or other rights to all or any of the licensed patents, in which case, certain licensed patents that IV opts to release revert back to the Company.

The Company also entered into a patent rights agreement pursuant to which the Company granted IV an exclusive call option to purchase all or any number of the licensed patents and/or patent applications. The agreement further provides for the grant by IV to the Company the right to put all or any number of patents within the licensed patents to IV if IV threatens or commences an action or proceeding with respect to infringement of a licensed patent.

The financial aspects of the IV agreement for the Company include:

• a license issue fee of $36 million, paid to the Company in increasing quarterly installments over three years ($11,400 in 2011, $12,550 in 2012 and $6,775 in 2013);

• 20% of the profits generated from the IV licensing program, which profits consist of sublicensing and other monetization revenue less specified expenses, including the license issue fee;

• IV assumes responsibility for approximately $1 million per year in prosecution and maintenance costs previously borne by the Company;

• a minimum of $4 million of paid support services over five years from the Company to assist IV in maximizing the value of the licensed assets; and

• a royalty-free grant-back license to the licensed patents to continue the Company’s existing business related to those assets, including maintaining and renewing existing patent licenses, and providing software and services.

The payment terms extend beyond the Company’s normal 30 to 60 day payment terms, thus the license revenue is being recognized when the installments are due, and the support services will be recognized as the services are performed.

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Shareholders' Equity (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2012
Summarizes information about stock options outstanding
Exercise Price, Lower Range Limit	$ 9.64
Exercise Price, Upper Range Limit	$ 30.01
Number Outstanding	855,988
Remaining Contractual Life (Years), Outstanding	6 years 8 months 23 days
Weighted Average Price, Outstanding	$ 15.16
Number Exercisable	693,248
Option Exercisable Remaining Contractual Life (Years)	6 years 4 months 10 days
Weighted Average Price, Exercisable	$ 12.78
Range One [Member]
Summarizes information about stock options outstanding
Exercise Price, Lower Range Limit	$ 9.64
Exercise Price, Upper Range Limit	$ 9.91
Number Outstanding	508,072
Remaining Contractual Life (Years), Outstanding	5 years 10 months 10 days
Weighted Average Price, Outstanding	$ 9.66
Number Exercisable	508,072
Option Exercisable Remaining Contractual Life (Years)	5 years 10 months 10 days
Weighted Average Price, Exercisable	$ 9.66
Range Two [Member]
Summarizes information about stock options outstanding
Exercise Price, Lower Range Limit	$ 14.99
Exercise Price, Upper Range Limit	$ 18.01
Number Outstanding	132,916
Remaining Contractual Life (Years), Outstanding	7 years 29 days
Weighted Average Price, Outstanding	$ 15.67
Number Exercisable	103,126
Option Exercisable Remaining Contractual Life (Years)	7 years 1 month 6 days
Weighted Average Price, Exercisable	$ 15.87
Range Three [Member]
Summarizes information about stock options outstanding
Exercise Price, Lower Range Limit	$ 24.35
Exercise Price, Upper Range Limit	$ 30.01
Number Outstanding	215,000
Remaining Contractual Life (Years), Outstanding	8 years 6 months 26 days
Weighted Average Price, Outstanding	$ 27.84
Number Exercisable	82,050
Option Exercisable Remaining Contractual Life (Years)	8 years 5 months 27 days
Weighted Average Price, Exercisable	$ 28.26

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Revenue Recognition

12 Months Ended

Dec. 31, 2012

Revenue Recognition [Abstract]

Revenue Recognition

(3) Revenue Recognition

The Company derives its revenue primarily from development services and licensing of its patent portfolio:

• Service revenue consists primarily of software development and consulting services. The majority of service revenue arrangements are structured as time and materials consulting agreements and fixed price consulting agreements.

• License revenue, including royalty revenue, originates primarily from licensing the Company’s technology and patents where the Company receives royalties as its income stream. Subscription revenue, which consists of products and services, are more recurring in nature.

Revenue is recognized in accordance with ASC 605 “Revenue Recognition” and ASC 985 “Software” when the following four criteria are met:

(i) persuasive evidence of an arrangement exists,

(ii) delivery has occurred,

(iii) the fee is fixed or determinable, and

(iv) collection is reasonably assured.

Some customer arrangements encompass multiple deliverables, such as patent license, professional services, software subscriptions, and maintenance fees. For arrangements that include multiple deliverables, the Company identifies separate units of accounting at inception based on the consensus reached under ASC 605-25 “Multiple-Element Arrangements,” which provides that revenue arrangements with multiple deliverables should be divided into separate units of accounting if certain criteria are met. The consideration for the arrangement is allocated to the separate units of accounting using the relative selling price method.

The relative selling price method allocates the consideration based on the Company’s specific assumptions rather than assumptions of a marketplace participant, and any discount in the arrangement proportionally to each deliverable on the basis of each deliverable’s selling price.

Applicable revenue recognition criteria is considered separately for each separate unit of accounting as follows:

• Revenue from professional service arrangements is generally determined based on time and materials. Revenue for professional services is recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided.

• License revenue is recognized when amounts owed to the Company have been earned, are fixed or determinable (within the Company’s normal 30 to 60 day payment terms), and collection is reasonably assured. If the payment terms extend beyond the normal 30 to 60 days, the fee may not be considered to be fixed or determinable, and the revenue would then be recognized when installments are due.

• The Company records revenue from certain license agreements upon cash receipt as a result of collectability not being reasonably assured.

• The Company’s standard payment terms for license arrangements are 30 to 60 days. Extended payment terms increase the likelihood the Company will grant a customer a concession, such as reduced license payments or additional rights, rather than hold firm on minimum commitments in an agreement to the point of losing a potential advocate and licensee of patented technology in the marketplace. Extended payment terms on patent license arrangements are not considered to be fixed or determinable if payments are due beyond the Company’s standard payment terms, primarily because of the risk of substantial modification present in the Company’s patent licensing business. As such, revenue on license arrangements with extended payment terms are recognized as fees become fixed or determinable.

• Subscription revenue, which includes subscriptions for products and services, is generally paid in advance and s recognized over the term of the license or service period, which is generally one month to twenty-four months.

Deferred revenue consists of billings in advance for professional services, licenses and subscriptions for which revenue has not been earned.

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Description of Business and Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Summary of fair value hierarchy for financial assets
Total	$ 38,068
Fair Value, Measurements, Recurring [Member]
Summary of fair value hierarchy for financial assets
Total	38,068	32,951
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Summary of fair value hierarchy for financial assets
Total	901	896
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Summary of fair value hierarchy for financial assets
Total	37,167	32,055
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Summary of fair value hierarchy for financial assets
Total
Fair Value, Measurements, Recurring [Member] | Money market securities [Member]
Summary of fair value hierarchy for financial assets
Total	901	896
Fair Value, Measurements, Recurring [Member] | Money market securities [Member] | Level 1 [Member]
Summary of fair value hierarchy for financial assets
Total	901	896
Fair Value, Measurements, Recurring [Member] | Money market securities [Member] | Level 3 [Member]
Summary of fair value hierarchy for financial assets
Total
Fair Value, Measurements, Recurring [Member] | Certificates of deposits [Member]
Summary of fair value hierarchy for financial assets
Total	491	736
Fair Value, Measurements, Recurring [Member] | Certificates of deposits [Member] | Level 2 [Member]
Summary of fair value hierarchy for financial assets
Total	491	736
Fair Value, Measurements, Recurring [Member] | Certificates of deposits [Member] | Level 3 [Member]
Summary of fair value hierarchy for financial assets
Total
Fair Value, Measurements, Recurring [Member] | U.S. treasuries [Member]
Summary of fair value hierarchy for financial assets
Total	289	718
Fair Value, Measurements, Recurring [Member] | U.S. treasuries [Member] | Level 2 [Member]
Summary of fair value hierarchy for financial assets
Total	289	718
Fair Value, Measurements, Recurring [Member] | U.S. treasuries [Member] | Level 3 [Member]
Summary of fair value hierarchy for financial assets
Total
Fair Value, Measurements, Recurring [Member] | U.S. Federal agency notes [Member]
Summary of fair value hierarchy for financial assets
Total	1,637	7,942
Fair Value, Measurements, Recurring [Member] | U.S. Federal agency notes [Member] | Level 2 [Member]
Summary of fair value hierarchy for financial assets
Total	1,637	7,942
Fair Value, Measurements, Recurring [Member] | U.S. Federal agency notes [Member] | Level 3 [Member]
Summary of fair value hierarchy for financial assets
Total
Fair Value, Measurements, Recurring [Member] | Pre-refunded and other municipals [Member]
Summary of fair value hierarchy for financial assets
Total	22,036	2,800
Fair Value, Measurements, Recurring [Member] | Pre-refunded and other municipals [Member] | Level 2 [Member]
Summary of fair value hierarchy for financial assets
Total	22,036	2,800
Fair Value, Measurements, Recurring [Member] | Pre-refunded and other municipals [Member] | Level 3 [Member]
Summary of fair value hierarchy for financial assets
Total
Fair Value, Measurements, Recurring [Member] | Corporate notes [Member]
Summary of fair value hierarchy for financial assets
Total	10,100	16,459
Fair Value, Measurements, Recurring [Member] | Corporate notes [Member] | Level 2 [Member]
Summary of fair value hierarchy for financial assets
Total	10,100	16,459
Fair Value, Measurements, Recurring [Member] | Corporate notes [Member] | Level 3 [Member]
Summary of fair value hierarchy for financial assets
Total
Fair Value, Measurements, Recurring [Member] | Commercial paper [Member]
Summary of fair value hierarchy for financial assets
Total	2,614	3,400
Fair Value, Measurements, Recurring [Member] | Commercial paper [Member] | Level 2 [Member]
Summary of fair value hierarchy for financial assets
Total	2,614	3,400
Fair Value, Measurements, Recurring [Member] | Commercial paper [Member] | Level 3 [Member]
Summary of fair value hierarchy for financial assets
Total

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Acquisition of Attributor Corporation (Tables)

12 Months Ended

Dec. 31, 2012

Acquisition of Attributor Corporation [Abstract]

Total preliminary acquisition consideration

The total purchase price is as follows:

Closing merger consideration	$	5,442
Fair value of contingent consideration		190
Total purchase price	$	5,632

Preliminary allocation of total purchase price

The preliminary allocation of the purchase price estimated at the December 3, 2012 acquisition date is as follows:

Total purchase price				$	5,632
Less: Estimated fair value of net tangible assets acquired and (liabilities assumed):
Cash and cash equivalents	$	350
Trade accounts receivable, net		527
Other current assets		18
Property and equipment, net		102
Deferred tax assets		1,225
Accounts payable and other accrued liabilities		(499	)
Deferred revenue		(225	)
Less: Estimated fair value of identifiable intangible assets acquired:
Existing technology		1,560
Customer relationships		290
Backlog		760
Tradenames		290
Non-solicitation agreements		120
Preliminary goodwill				$	1,114

Summary of intangible assets acquired in connection with the acquisition

The following table summarizes the estimated fair value of intangible assets acquired, their estimated useful lives and the amortization in the Consolidated Statements of Operations for the year ended December 31, 2012:

	Fair Value		Estimated Life (years)		Amortization Expense
Amortization expense:
Cost of revenue:
Existing technology	$	1,560		5	$	26
Sales and marketing:
Customer relationships		290		7		3
Backlog		760		2		32
Tradenames		290		3		8
General and administrative:
Non-solicitation agreements		120		1		10
Total	$	3,020				79

Pro-forma financial information presented for informational purposes

The following table presents the unaudited pro forma results for the periods set forth below. The unaudited pro forma financial information combines the results of operations as though the acquisition had occurred on January 1, 2011. No pro forma adjustments have been made for our incremental transaction or integration-related costs. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had occurred on January 1, 2011: (in thousands):

	Pro-Forma		Pro-Forma
	Year Ended December 31, 2012		Year Ended December 31, 2011
	(unaudited)		(unaudited)
Revenue	$	49,273	$	39,445
Net income	$	6,807	$	2,265
Net income per common share—basic	$	0.95	$	0.33
Net income per common share—diluted	$	0.92	$	0.30

Pro forma adjustments that effected net income

The pro forma information above includes the following pro forma adjustments that effected net income (in thousands):

	Year Ended December 31, 2012			Year Ended December 31, 2011
	(unaudited)			(unaudited)
Revenue adjustment	$	145		$	(233	)
Amortization expense		(830	)		(950	)
Stock-based compensation expense		(505	)		(505	)
Direct transaction costs		190			(190	)
Income tax benefit		834			1,747
Total impact to net income of pro forma adjustments	$	(166	)	$	(131	)

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Trade Accounts Receivable and Allowance for Doubtful Accounts (Tables)

12 Months Ended

Dec. 31, 2012

Trade Accounts Receivable and Allowance for Doubtful Accounts [Abstract]

Trade accounts receivable are recorded at the invoiced amount

Trade accounts receivable are recorded at the invoiced amount.

	December 31, 2012		December 31, 2011
Trade accounts receivable	$	4,216	$	3,502
Allowance for doubtful accounts		—		—
Trade accounts receivable, net	$	4,216	$	3,502
Unpaid deferred revenue included in accounts receivable	$	1,589	$	2,084

Customers who accounted for more than 10% of accounts receivable

Customers who accounted for more than 10% of trade accounts receivable, are as follows:

	December 31, 2012			December 31, 2011
Central Banks		30	%		45	%
Nielsen		24	%		29	%
Civolution		14	%		14	%

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Intangibles (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Intangibles (Textual) [Abstract]
Aggregate amortization expense	$ 315	$ 124	$ 79
Patents [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated Useful life	17 years

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Joint Ventures and Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2012

Related Party Transaction [Line Items]

Related Party Transactions

Related Party Transactions

	Year Ended December 31, 2012			Year Ended December 31, 2011		Year Ended December 31, 2010
TVaura LLC:
Capital contributions (return of capital)	$	(104	)	$	1,200	$	1,600
Revenue (1)	$	—		$	2,640	$	2,723
TVaura Mobile LLC:
Capital contributions	$	796		$	900	$	1,200
Revenue (1)	$	272		$	—	$	—
Total:
Capital contributions, net	$	692		$	2,100	$	2,800
Revenue (1)	$	272		$	2,640	$	2,723

(1) Technical and development services

TVaura LLC [Member]

Related Party Transaction [Line Items]

Summarized financial data

Summarized financial data for TVaura LLC:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Current assets	$	—	$	402	$	777
Noncurrent assets	$	—	$	22	$	31
Current liabilities	$	—	$	169	$	255
Noncurrent liabilities	$	—	$	—	$	—

	Year Ended   December 31,   2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Revenue	$	—		$	—		$	—
Gross profit	$	—		$	—		$	—
Operating expenses	$	52		$	2,699		$	2,825
Net loss from continuing operations	$	(52	)	$	(2,699	)	$	(2,824	)
The Company’s pro-rata share – net loss	$	(27	)	$	(1,376	)	$	(1,440	)
The Company’s gain on investment	$	70		$	—		$	—

TVaura Mobile LLC [Member]

Related Party Transaction [Line Items]

Summarized financial data

Summarized financial data for TVaura Mobile LLC:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Current assets	$	937	$	1,308	$	1,913
Noncurrent assets	$	—	$	—	$	—
Current liabilities	$	957	$	720	$	382
Noncurrent liabilities	$	—	$	—	$	—

	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Revenue	$	—		$	105		$	—
Gross profit	$	—		$	105		$	—
Operating expenses	$	2,266		$	2,848		$	1,532
Net loss from continuing operations	$	(2,266	)	$	(2,743	)	$	(1,532	)
The Company’s pro-rata share – net loss	$	(1,100	)	$	(1,338	)	$	(740	)
The Company’s loss on investment	$	(50	)	$	—		$	—

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Intangibles (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Estimated future aggregate amortization expense
Year ending December 31,2013	$ 1,061
2014	975
2015	572
2016	477
2017	$ 441

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Stock-Based Compensation (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Weighted average assumptions and results for options granted
Expected volatility, minimum	42.00%	52.00%
Expected volatility, maximum	44.00%	55.00%
Risk-free interest rate, minimum	1.00%	2.50%
Risk-free interest rate, maximum	2.00%	3.00%
Expected dividend yield	0.00%	0.00%
Fair value of stock options granted	$ 2,464	$ 1,159
Maximum [Member]
Weighted average assumptions and results for options granted
Expected life (in years)	5 years 9 months	6 years
Minimum [Member]
Weighted average assumptions and results for options granted
Expected life (in years)	5 years 3 months 11 days	5 years 2 months 12 days

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Acquisition of Attributor Corporation (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012
Acquisition of Attributor Corporation (Textual) [Abstract]
Cash paid by Company under terms of merger agreement	$ 5,632,000
Cash paid by the company after the adjustments	5,442,000
Additional amount received at the closing merger consideration	150,000
Indemnification claims period	17 months
Additional amount receivable by attributor stockholders	900,000
Fair value of contingent consideration	190,000
Contingent cash payment	Mar. 31, 2014
Restricted shares of common stock received by employees of Attributor	1,000,000
Restricted Stock Awards Will Vest	2 years
Transaction related expenses associated with the Attributor acquisition during the year	$ 200,000

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Acquisition of Attributor Corporation (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Total preliminary acquisition consideration
Closing merger consideration	$ 5,442
Fair value of contingent consideration	190
Total preliminary purchase price	$ 5,632

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Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,500,000	2,500,000
Preferred stock, shares issued	10,000	10,000
Preferred stock, shares outstanding	10,000	10,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	7,168,359	7,008,031
Common stock, shares outstanding	7,168,359	7,008,031

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Net Income Per Common Share

12 Months Ended

Dec. 31, 2012

Net Income Per Common Share [Abstract]

Net Income Per Common Share

(8) Net Income Per Common Share

The Company calculates basic and diluted earnings per common share in accordance with ASC 260 “Earnings Per Share,” using the two-class method as the Company’s unvested restricted stock is a participating security given these awards contain non-forfeitable rights to receive dividends. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed.

Basic earnings per common share excludes dilution and is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net earnings allocable to common shares by the weighted-average number of common shares as of the balance sheet date, as adjusted for the potential dilutive effect of non-participating securities. The following table reconciles earnings per common share for the year ended December 31, 2012:

	Year Ended December 31, 2012
Basic EPS:
Net income	$	8,272
Less: Net income allocable to participating securities		(426	)
Net income allocable to common shares	$	7,846
Weighted average common shares outstanding – basic (in thousands)		6,757
Basic earnings per common share	$	1.16

	Year Ended December 31, 2012
Diluted EPS:
Net income	$	8,272
Less: Net income allocable to participating securities		(426	)
Net income allocable to common shares	$	7,846
Weighted average common shares outstanding – basic (in thousands)		6,757
Dilutive effect of non-participating securities (in thousands)		232
Weighted average common shares outstanding – dilutive (in thousands)		6,989
Diluted earnings per common share	$	1.12

There were 215,000 common stock equivalents related to stock options that were anti-dilutive and excluded from diluted net income per share calculations for the year ended December 31, 2012 as their exercise prices were higher than the average market price of the underlying common stock for the period.

Net income per common share was calculated under the treasury stock method in prior periods because the impact of applying the two-class method for computing basic and diluted earnings per common share was not material. Basic and diluted net income per share were computed using the weighted average number of common shares outstanding during each period, with diluted net income per share including the effect of potentially dilutive common shares.

	Year Ended December 31, 2011						Year Ended December 31, 2010
	Income (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount		Income (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount
Basic EPS
Income available to common shareholders	$	5,656		6,741	$	0.84	$	4,174		7,120	$	0.59
Effect of Dilutive Securities
Options				393						440
Restricted stock				296						63
Diluted EPS
Income available to common shareholders	$	5,656		7,430	$	0.76	$	4,174		7,623	$	0.55

There were 136,957 common stock equivalents related to stock options that were anti-dilutive and excluded from diluted net income per share calculations for 2011 as their exercise prices were higher than the average market price of the underlying common stock for the period.

There were no common stock equivalents related to stock options that were anti-dilutive for 2010 because their exercise prices were lower than the average market price of the underlying common stock for the period.

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Consolidated Statements of Shareholders' Equity (USD $) In Thousands, except Share data	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)
BEGINNING BALANCE at Dec. 31, 2009	$ 46,659	$ 50	$ 7	$ 49,283	$ (2,681)
BEGINNING BALANCE, shares at Dec. 31, 2009		10,000	7,205,701
Exercise of stock options	3,045			3,045
Exercise of stock options, shares	313,832		313,832
Issuance of restricted common stock			124,560
Forfeiture of restricted common stock, shares			(3,450)
Purchase and retirement of common stock	(5,824)			(5,824)
Purchase and retirement of common stock, shares			(197,193)
Stock-based compensation	3,105			3,105
Net income/loss	4,174				4,174
ENDING BALANCE at Dec. 31, 2010	51,159	50	7	49,609	1,493
ENDING BALANCE, shares at Dec. 31, 2010		10,000	7,443,450
Exercise of stock options	1,651			1,651
Exercise of stock options, shares	169,420		169,420
Issuance of restricted common stock			190,180
Forfeiture of restricted common stock, shares			(18,120)
Purchase and retirement of common stock	(22,048)			(22,048)
Purchase and retirement of common stock, shares			(776,899)
Stock-based compensation	4,231			4,231
Tax benefit from stock-based awards	1,068			1,068
Net income/loss	5,656				5,656
ENDING BALANCE at Dec. 31, 2011	41,717	50	7	34,511	7,149
ENDING BALANCE, shares at Dec. 31, 2011		10,000	7,008,031
Exercise of stock options	1,660			1,660
Exercise of stock options, shares	172,250		172,250
Issuance of restricted common stock			202,340
Forfeiture of restricted common stock, shares			(12,300)
Purchase and retirement of common stock	(4,760)			(4,760)
Purchase and retirement of common stock, shares			(201,962)
Stock-based compensation	5,414			5,414
Tax benefit from stock-based awards	3,044			3,044
Net income/loss	8,272				8,272
Cash dividends declared	(2,344)				(2,344)
ENDING BALANCE at Dec. 31, 2012	$ 53,003	$ 50	$ 7	$ 39,869	$ 13,077
ENDING BALANCE, shares at Dec. 31, 2012		10,000	7,168,359

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Stock-Based Compensation (Details 3)	12 Months Ended
	Dec. 31, 2012
Stock Options [Member]
Expects recognize compensation costs for stock options and restricted stock over weighted average period
Weighted average period	1 year 1 month 17 days
Restricted Stock [Member]
Expects recognize compensation costs for stock options and restricted stock over weighted average period
Weighted average period	1 year 5 months 16 days

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 6,866	$ 3,419
Marketable securities	25,403	22,244
Trade accounts receivable, net	4,216	3,502
Other current assets	1,016	1,306
Total current assets	37,501	30,471
Marketable securities	6,787	7,715
Property and equipment, net	1,453	1,395
Intangibles, net	6,721	2,808
Goodwill	1,114
Investments in joint ventures	0	415
Deferred tax assets, net	3,589	2,634
Other assets	166	355
Total assets	57,331	45,793
Current liabilities:
Accounts payable and other accrued liabilities	1,143	952
Deferred revenue	2,512	2,660
Total current liabilities	3,655	3,612
Deferred rent and other long-term liabilities	673	464
Total liabilities	4,328	4,076
Commitments and contingencies (Note 16)
Shareholders' equity:
Preferred stock (par value $0.001 per share, 2,500,000 authorized, 10,000 shares issued and outstanding at December 31, 2012 and 2011)	50	50
Common stock (par value $0.001 per share, 50,000,000 authorized, 7,168,359 and 7,008,031 shares issued and outstanding at December 31, 2012 and 2011, respectively)	7	7
Additional paid-in capital	39,869	34,511
Retained earnings	13,077	7,149
Total shareholders' equity	53,003	41,717
Total liabilities and shareholders' equity	$ 57,331	$ 45,793

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Patent Licensing Arrangement with Intellectual Ventures (Details) (USD $)	12 Months Ended
	Dec. 31, 2012 PatentApplication Patent InstallmentsIncreaseFee	Dec. 31, 2013	Dec. 31, 2011
Patent Licensing Arrangement with Intellectual Ventures (Textual) [Abstract]
Number of patents held by the company	597
Number of patent applications held by the company	288
License issue fee	$ 36,000,000
Number of installments in which license fee is increasing	4
License issue fee installments period	3 years
Increase in installments	12,550	6,775	11,400
Percentage of profits including license issue fee	20.00%
Responsibility in prosecution and maintenance costs per year	1,000,000
Minimum value of paid support for maximizing the value of licensed assets	$ 4,000,000
Period for maximizing value of licensed assets	5 years
Maximum [Member]
Patent Licensing Arrangement with Intellectual Ventures [Line Items]
Company's normal payment term	60 days
Minimum [Member]
Patent Licensing Arrangement with Intellectual Ventures [Line Items]
Company's normal payment term	30 days

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Joint Ventures and Related Party Transactions (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Summarized Financial Data [Abstract]
Current assets	$ 37,501				$ 30,471				$ 37,501	$ 30,471
Revenue	9,314	8,903	9,112	17,046	8,925	8,550	9,473	9,091	44,375	36,039	31,150
Gross profit	7,666	7,436	7,529	15,236	7,069	6,808	7,783	7,442	37,867	29,102	24,450
Operating expenses									23,273	22,713	18,299
Current liabilities	3,655				3,612				3,655	3,612
TVaura LLC [Member]
Summarized Financial Data [Abstract]
Current assets					402					402	777
Noncurrent assets					22					22	31
Noncurrent liabilities
Revenue
Gross profit
Operating expenses									52	2,699	2,825
Current liabilities					169					169	255
Net loss from continuing operations									(52)	(2,699)	(2,824)
The Company's pro-rata share net loss									(27)	(1,376)	(1,440)
The Company's gain on investment									70
TVaura Mobile LLC [Member]
Summarized Financial Data [Abstract]
Current assets	937				1,308				937	1,308	1,913
Noncurrent assets
Noncurrent liabilities
Revenue										105
Gross profit										105
Operating expenses									2,266	2,848	1,532
Current liabilities	957				720				957	720	382
Net loss from continuing operations									(2,266)	(2,743)	(1,532)
The Company's pro-rata share net loss									(1,100)	(1,338)	(740)
The Company's gain on investment									$ (50)

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Shareholders' Equity (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Shareholders' Equity (Textual) [Abstract]
Preferred stock, shares authorized	2,500,000	2,500,000
Preferred stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, par value	$ 0.001	$ 0.001
Options with exercise prices less than per share	$ 15.16	$ 14.23	$ 10.47	$ 9.65
Restricted Stock Awards Will Vest	2 years
Series A Preferred Stock [Member]
Shareholders' Equity (Textual) [Abstract]
Authorized shares of series A Redeemable Nonvoting Preferred stock	10,000
Preferred stock [Member]
Shareholders' Equity (Textual) [Abstract]
Preferred stock, shares authorized	2,500,000
Preferred stock, par value	$ 0.001
Series A Preferred redeemable stated fair value	$ 5.00
Common stock [Member]
Shareholders' Equity (Textual) [Abstract]
Common stock, shares authorized	50,000,000
Common stock, par value	$ 0.001
Stock Options [Member]
Shareholders' Equity (Textual) [Abstract]
Stock Based Compensation Plans Equity Awards	799,415
Intrinsic value is based on closing price of per share of Digimarc common stock	$ 20.70
Options with exercise prices less than per share	$ 20.70
Restricted Stock [Member]
Shareholders' Equity (Textual) [Abstract]
Restricted Stock Awards Will Vest	4 years
Stock Incentive Plan [Member] | Common stock [Member]
Shareholders' Equity (Textual) [Abstract]
Authorized shares of series A Redeemable Nonvoting Preferred stock	2,500,000

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2012

Segment Information [Abstract]

Geographical segment revenue

Revenue, based upon the “bill-to” location, by geographic area is as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Domestic	$	30,736	$	22,660	$	19,034
International (1)		13,639		13,379		12,116
Total	$	44,375	$	36,039	$	31,150

(1) Revenue from the Central Banks, comprised of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is not practicable.

Customers who accounted for more than 10% of the Company's revenues

Customers who accounted for more than 10% of the Company’s revenues are as follows:

	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
IV		30	%		33	%		18	%
Verance Corporation (“Verance”)		27	%		*			*
Central Banks		23	%		27	%		30	%
The Nielsen Company (“Nielsen”)		*			11	%		12	%
Arbitron		—			—			14	%

* Less than 10%

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Stock Repurchases

12 Months Ended

Dec. 31, 2012

Shareholders' Equity/Stock Repurchases [Abstract]

Stock Repurchases

(17) Stock Repurchases

Summary of common stock shares repurchased:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Private transaction		—		552,536		—
Repurchase program		50,900		104,577		—
Exercise of stock options		69,272		48,432		102,077
Tax withholding obligations on stock options		39,005		46,401		81,610
Tax withholding obligations on restricted shares		42,785		24,953		13,506
Total		201,962		766,899		197,193

Value of common stock shares repurchased:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Private transaction	$	—	$	14,927	$	—
Repurchase program		1,201		3,099		—
Exercise of stock options		1,660		1,651		3,037
Tax withholding obligations on stock options		949		1,658		2,435
Tax withholding obligations on restricted shares		950		713		352
Total	$	4,760	$	22,048	$	5,824

On January 26, 2011, the Company repurchased 552,536 shares of its common stock from Koninklijke Philips Electronics, N.V., in a privately negotiated transaction. The shares were purchased for an aggregate price of approximately $14,927, including transaction fees. To facilitate the repurchase, the Company sold $10,752 and $2,996 of short- and long-term marketable securities, respectively, prior to their maturity date at an immaterial gain.

In each of April 2009 and November 2011, the Board of Directors approved a stock repurchase program authorizing the purchase, at the discretion of management, of shares of the Company’s common stock through either periodic open-market or private transactions at then-prevailing market prices. Under the April 2009 program that expired in April 2012, the Company repurchased 223,851 shares at an aggregate purchase price of $4,858. Under the November 2011 program, the Board of Directors approved an additional $5,000. In December 2012, the program was extended through December 31, 2013. As of December 31, 2012, the Company had repurchased 43,293 shares under this program at an aggregate purchase price of $1,002.

As part of the Company’s 2008 Stock Incentive Plan, stock options are granted and restricted stock shares are awarded to certain employees and directors.

Pursuant to the terms of the stock option grants, the Company purchases a number of whole shares of common stock having a fair market value (as determined as of the date of exercise) equal to the amount of the total value of the aggregate exercise price of the options exercised. In addition, the Company withholds (purchases) from shares issued upon exercise of the stock options a number of whole shares of common stock having a fair market value (as determined by the Company as of the date of vesting) equal to the amount of tax required to be withheld by law, in order to satisfy the tax withholding obligations of the Company in connection with the exercise of such options.

Pursuant to the terms of the restricted stock award agreement, the Company withholds (purchases) from fully vested shares of common stock otherwise deliverable to the employee, a number of whole shares of common stock having a fair market value (as determined as of the date of vesting) equal to the amount of tax required to be withheld by law, in order to satisfy the tax withholding obligations of the Company in connection with the vesting of such shares.

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Revenue Recognition (Details)	12 Months Ended
	Dec. 31, 2012
Revenue Recognition (Textual) [Abstract]
License revenue recognized payment terms, maximum	60 days
License revenue recognized payment terms, minimum	30 days
Licenses revenue term minimum	1 month
Licenses revenue term maximum	24 months

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Defined Contribution Pension Plan (Details Textual)	12 Months Ended
	Dec. 31, 2012
Defined Contribution Pension Plan (Textual) [Abstract]
Employees may contribute their pay to the Plan	75.00%

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Segment Information (Details Textual)	12 Months Ended
	Dec. 31, 2012
Segment Information (Textual) [Abstract]
Revenue from segments	10.00%
Minimum [Member]
Segment Information (Textual) [Abstract]
Revenue from segments	10.00%

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Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Depreciation and amortization on property and equipment using the straight-line method
Office furniture and fixtures	$ 420	$ 410
Equipment	1,886	1,872
Leasehold improvements	1,083	1,041
Gross property and equipment	3,389	3,323
Less accumulated depreciation and amortization	(1,936)	(1,928)
Property and equipment, net	$ 1,453	$ 1,395

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Stock Repurchases (Tables)

12 Months Ended

Dec. 31, 2012

Shareholders' Equity/Stock Repurchases [Abstract]

Summary of common stock shares repurchased

Summary of common stock shares repurchased:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Private transaction		—		552,536		—
Repurchase program		50,900		104,577		—
Exercise of stock options		69,272		48,432		102,077
Tax withholding obligations on stock options		39,005		46,401		81,610
Tax withholding obligations on restricted shares		42,785		24,953		13,506
Total		201,962		766,899		197,193

Value of common stock shares repurchased

Value of common stock shares repurchased:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Private transaction	$	—	$	14,927	$	—
Repurchase program		1,201		3,099		—
Exercise of stock options		1,660		1,651		3,037
Tax withholding obligations on stock options		949		1,658		2,435
Tax withholding obligations on restricted shares		950		713		352
Total	$	4,760	$	22,048	$	5,824

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Shareholders' Equity (Tables)

12 Months Ended

Dec. 31, 2012

Shareholders' Equity/Stock Repurchases [Abstract]

Summary of options granted, exercised, canceled and expired

Options granted, exercised, canceled and expired under the stock incentive plan are summarized as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Options outstanding, December 31, 2009		1,167,323		$	9.65	$	6.28
Granted		140,000		$	15.64	$	8.28
Exercised		(313,832	)	$	9.70	$	6.32
Canceled		—			—		—
Options outstanding, December 31, 2010		993,491		$	10.47	$	6.55
Granted		215,000		$	27.84	$	11.46
Exercised		(169,420	)	$	9.75	$	6.33
Canceled		(10,833	)	$	9.64	$	6.28
Options outstanding, December 31, 2011		1,028,238		$	14.23	$	7.61
Granted		—			—		—
Exercised		(172,250	)	$	9.64	$	6.29
Canceled		—			—		—
Options outstanding, December 31, 2012		855,988		$	15.16	$	7.88	$	6,280
Options exercisable, December 31, 2012		693,248		$	12.78			$	6,110
Options unvested, December 31, 2012		162,740		$	25.28			$	170

Summarizes information about stock options outstanding

The following table summarizes information about stock options outstanding at December 31, 2012:

	Options Outstanding						Options Exercisable
Exercise Price	Number Outstanding		Remaining Contractual Life (Years)		Weighted Average Price		Number Exercisable		Remaining Contractual Life (Years)		Weighted Average Price
$9.64 – $9.91		508,072		5.86	$	9.66		508,072		5.86	$	9.66
$14.99 – $18.01		132,916		7.08	$	15.67		103,126		7.10	$	15.87
$24.35 – $30.01		215,000		8.57	$	27.84		82,050		8.49	$	28.26
$9.64 – $30.01		855,988		6.73	$	15.16		693,248		6.36	$	12.78

Reconciliation of unvested balance of restricted stock

The following table reconciles the unvested balance of restricted stock:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance, December 31, 2009		111,000		$	10.02
Granted		124,560		$	16.77
Vested		(34,350	)	$	9.89
Canceled		(3,450	)	$	13.05
Unvested balance, December 31, 2010		197,760		$	14.25
Granted		190,180		$	29.12
Vested		(73,110	)	$	20.82
Canceled		(18,120	)	$	19.24
Unvested balance, December 31, 2011		296,710		$	21.51
Granted		202,340		$	22.51
Vested		(117,667	)	$	22.52
Canceled		(12,300	)	$	22.05
Unvested balance, December 31, 2012		369,083		$	21.72

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Defined Contribution Pension Plan (Tables)

12 Months Ended

Dec. 31, 2012

Defined Benefit Plan, Assets for Plan Benefits [Abstract]

Statement of company made matching contributions

The Company made matching contributions in the aggregate amount as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Matching contributions	$	366	$	349	$	323

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

(7) Stock-Based Compensation

Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include option grants, restricted stock awards and preferred stock.

Stock-based compensation expense related to internal legal labor is capitalized to patent costs based on direct labor hours charged to capitalized patent costs.

Determining Fair Value

Preferred Stock

The Board of Directors authorized 10,000 shares of Series A Redeemable Nonvoting Preferred stock (Series A Preferred) that were issued to certain executive officers at the time of formation. The Series A Preferred has no voting rights, except as required by law, and may be redeemed at the option of the Company’s Board of Directors at any time on or after June 18, 2013.

The Series A Preferred is redeemable based on the stated fair value of $5.00 per share. The Series A Preferred has no dividend rights and no rights to the undistributed earnings of the Company.

Stock Options

Valuation and Amortization Method. The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model. The Company amortizes the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and pre-vesting and post-vesting forfeitures. Stock options granted generally vest over three to four years for employee grants and one to two years for director grants, and have contractual terms of ten years.

Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the expected life of the award.

Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the expected life of the award.

Expected Dividend Yield. The expected dividend yield used is derived using a formula which uses the Company’s expected annual dividend rate over the expected term divided by the fair value of the Company’s common stock at the grant date.

A summary of the weighted average assumptions and results for options granted are as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011	Year Ended December 31, 2010
Expected life (in years)		N/A	5.28 – 5.75	5.2 – 6.0
Expected volatility		N/A	42% – 44%	52% – 55%
Risk-free interest rate		N/A	1.0% – 2%	2.5% – 3.0%
Expected dividend yield		N/A	0%	0%

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Fair value of stock options granted	$	—	$	2,464	$	1,159

Expected Forfeitures. The Company uses a zero forfeiture for both the stock options granted to employees, which vest monthly, and the stock options granted to the Company’s directors. Initial option grants, for new directors, vest 50% on the first anniversary of the date of grant and then monthly thereafter, and annual option grants, for continuing directors, vest monthly. The Company records stock-based compensation expense only for those awards that are expected to vest, including awards made to directors who are expected to continue with the Company through the year following the date of grant.

Restricted Stock

The Compensation Committee of the Board of Directors has awarded restricted stock shares under the Company’s 2008 Stock Incentive Plan to certain employees and directors. The shares subject to the restricted stock awards vest over a certain period, usually three to four years for employees and one year for directors, following the date of the grant. Specific terms of the restricted stock awards are governed by Restricted Stock Agreements between the Company and the award recipients. Restricted stock awards are treated as outstanding when granted.

The fair value of restricted stock awarded is based on the fair market value of the Company’s common stock on the date of the grant (measurement date), and is recognized over the vesting period using the straight-line method.

The Company records stock-based compensation expense for restricted stock awards only for those awards that are expected to vest, including awards made to directors who are expected to continue with the Company through the year following the date of grant.

Stock-based Compensation

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Stock-based compensation:
Cost of revenue	$	603	$	593	$	373
Sales and marketing		409		302		192
Research, development and engineering		840		560		314
General and administrative		3,148		2,568		2,083
Intellectual property		256		193		106
Stock compensation expense		5,256		4,216		3,068
Capitalized to patent costs		108		65		37
Total stock-based compensation	$	5,364	$	4,281	$	3,105

The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under all equity compensation plans, including preferred stock, stock options and restricted stock:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Unrecognized compensation costs	$	8,333	$	9,463	$	6,212

Total unrecognized compensation costs will be adjusted for any future changes in estimated forfeitures.

The Company expects to recognize the unrecognized compensation costs as of December 31, 2012 for stock options and restricted stock over a weighted average periods through December 2016 as follows:

	Stock Options		Restricted Stock
Weighted average period		1.13 years		1.46 years

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Net Income Per Common Share (Details Textual)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Net Income Per Common Share (Textual) [Abstract]
Common stock equivalents related to stock options that were anti-dilutive and excluded from diluted net income per share	215,000	136,957	0

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Stock Repurchases (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended			12 Months Ended
	Apr. 30, 2012	Nov. 30, 2011	Jan. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Shares Repurchases [Line Items]
Shares repurchased under the program/Repurchased of common stock	223,851			43,293
Purchased price of common stock				$ 4,760	$ 22,048	$ 5,824
Shares Repurchases (Textual) [Abstract]
Sale of short term marketable securities			10,752
Sale of long term marketable securities			2,996
Stock repurchase program authorizing additional		5,000
Extension period for additional stock repurchase program		1 year
Aggregate purchase price	4,858			1,002
Koninklijke Philips Electronics [Member]
Shares Repurchases [Line Items]
Shares repurchased under the program/Repurchased of common stock			552,536
Purchased price of common stock			$ 14,927

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2012

Stock-Based Compensation [Abstract]

Weighted average assumptions and results for options granted

A summary of the weighted average assumptions and results for options granted are as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011	Year Ended December 31, 2010
Expected life (in years)		N/A	5.28 – 5.75	5.2 – 6.0
Expected volatility		N/A	42% – 44%	52% – 55%
Risk-free interest rate		N/A	1.0% – 2%	2.5% – 3.0%
Expected dividend yield		N/A	0%	0%

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Fair value of stock options granted	$	—	$	2,464	$	1,159

Allocation of stock-based compensation

Stock-based Compensation

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Stock-based compensation:
Cost of revenue	$	603	$	593	$	373
Sales and marketing		409		302		192
Research, development and engineering		840		560		314
General and administrative		3,148		2,568		2,083
Intellectual property		256		193		106
Stock compensation expense		5,256		4,216		3,068
Capitalized to patent costs		108		65		37
Total stock-based compensation	$	5,364	$	4,281	$	3,105

Unrecognized compensation cost related to non-vested stock-based awards granted

The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under all equity compensation plans, including preferred stock, stock options and restricted stock:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Unrecognized compensation costs	$	8,333	$	9,463	$	6,212

Expects to recognize the unrecognized compensation cost for stock options and restricted stock over weighted average period

The Company expects to recognize the unrecognized compensation costs as of December 31, 2012 for stock options and restricted stock over a weighted average periods through December 2016 as follows:

	Stock Options		Restricted Stock
Weighted average period		1.13 years		1.46 years

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Description of Business and Summary of Significant Accounting Policies (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Summary of fair value maturities for financial asset
Maturities, Total	$ 38,068
Maturities, Less than 1 year	31,200
Maturities, 1-5 years	6,868
Maturities, 5-10 years
Maturities, More than 10 year

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Property and Equipment

12 Months Ended

Dec. 31, 2012

Property and Equipment [Abstract]

Property and Equipment

(10) Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Repairs and maintenance are charged to expense when incurred.

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally two to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.

	December 31, 2012			December 31, 2011
Office furniture and fixtures	$	420		$	410
Equipment		1,886			1,872
Leasehold improvements		1,083			1,041
Gross property and equipment		3,389			3,323
Less accumulated depreciation and amortization		(1,936	)		(1,928	)
Property and equipment, net	$	1,453		$	1,395

Leases

Future minimum lease payments under non-cancelable operating leases are as follows:

Year ending December 31:	Operating Leases
2013	$	893
2014		890
2015		920
2016		628
2017		—
Thereafter		—
Total minimum lease payments	$	3,331

Rent expense on the operating leases are as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Rent expense	$	776	$	866	$	832

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Quarterly Financial Information-Unaudited (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Quarterly Financial Information-Unaudited
Service revenue	$ 2,519	$ 2,616	$ 2,609	$ 3,048	$ 3,053	$ 3,108	$ 3,165	$ 3,069	$ 10,792	$ 12,395	$ 12,324
License and subscription revenue	6,795	6,287	6,503	13,998	5,872	5,442	6,308	6,022	33,583	23,644	18,826
Total revenue	9,314	8,903	9,112	17,046	8,925	8,550	9,473	9,091	44,375	36,039	31,150
Total cost of revenue	1,648	1,467	1,583	1,810	1,856	1,742	1,690	1,649	6,508	6,937	6,700
Gross profit	7,666	7,436	7,529	15,236	7,069	6,808	7,783	7,442	37,867	29,102	24,450
Gross profit percent, service revenue	45.00%	48.00%	44.00%	44.00%	42.00%	46.00%	49.00%	48.00%
Gross profit percent, license and subscription revenue	96.00%	98.00%	98.00%	99.00%	99.00%	99.00%	99.00%	99.00%
Gross profit percent, total	82.00%	84.00%	83.00%	89.00%	79.00%	80.00%	82.00%	82.00%
Sales and marketing	913	937	970	1,007	1,051	1,166	1,017	1,102	3,827	4,336	3,545
Research, development and engineering	2,277	2,320	2,146	1,998	1,710	1,958	1,884	1,775	8,741	7,327	5,687
General and administrative	2,226	2,282	2,191	2,758	2,839	2,000	2,270	2,847	9,457	9,956	7,864
Intellectual property	329	309	291	319	268	259	266	301	1,248	1,094	1,203
Operating income	1,921	1,588	1,931	9,154	1,201	1,425	2,346	1,417	14,594	6,389	6,151
Net income/loss	$ 1,054	$ 1,003	$ 1,216	$ 4,999	$ 453	$ 639	$ 3,626	$ 938	$ 8,272	$ 5,656	$ 4,174
Earnings per common share:
Net income per common share-basic	$ 0.15	$ 0.14	$ 0.17	$ 0.74	$ 0.07	$ 0.10	$ 0.54	$ 0.14	$ 1.16	$ 0.84	$ 0.59
Net income per common share-diluted	$ 0.14	$ 0.14	$ 0.17	$ 0.70	$ 0.06	$ 0.09	$ 0.50	$ 0.12	$ 1.12	$ 0.76	$ 0.55
Weighted average common shares outstanding-basic	6,791	6,761	6,737	6,738	6,699	6,706	6,696	6,864	6,757	6,741	7,120
Weighted average common shares outstanding-diluted	6,966	6,984	6,993	7,140	7,279	7,344	7,245	7,505	6,989	7,430	7,623

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Shareholders' Equity (Details 2) (Restricted stock activity [Member], USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Restricted stock activity [Member]
Number of Shares
Unvested, beginning balance	296,710	197,760	111,000
Granted	202,340	190,180	124,560
Vested	(117,667)	(73,110)	(34,350)
Canceled	(12,300)	(18,120)	(3,450)
Unvested, ending balance	369,083	296,710	197,760
Weighted Average Grant Date Fair Value
Weighted average grant date fair value unvested, Beginning balance	$ 21.51	$ 14.25	$ 10.02
Weighted average grant date fair value unvested, Granted	$ 22.51	$ 29.12	$ 16.77
Weighted average grant date fair value unvested, Vested	$ 22.52	$ 20.82	$ 9.89
Weighted average grant date fair value unvested, Canceled	$ 22.05	$ 19.24	$ 13.05
Weighted average grant date fair value unvested, Ending balance	$ 21.72	$ 21.51	$ 14.25

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Segment Information

12 Months Ended

Dec. 31, 2012

Segment Information [Abstract]

Segment Information

(6) Segment Information

Geographic Information

The Company derives its revenue from a single reporting segment: media management solutions. Revenue is generated in this segment through licensing of intellectual property, subscriptions to various products and services, and the delivery of services pursuant to contracts with various customers. The Company markets its products in the U.S. and in non-U.S. countries through its sales and licensing personnel.

Revenue, based upon the “bill-to” location, by geographic area is as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Domestic	$	30,736	$	22,660	$	19,034
International (1)		13,639		13,379		12,116
Total	$	44,375	$	36,039	$	31,150

(1) Revenue from the Central Banks, comprised of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is not practicable.

Major Customers

Customers who accounted for more than 10% of the Company’s revenues are as follows:

	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
IV		30	%		33	%		18	%
Verance Corporation (“Verance”)		27	%		*			*
Central Banks		23	%		27	%		30	%
The Nielsen Company (“Nielsen”)		*			11	%		12	%
Arbitron		—			—			14	%

* Less than 10%

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Description of Business and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Description of Business and Summary of Significant Accounting Policies [Abstract]

Description of Business and Summary of Significant Accounting Policies

(1) Description of Business and Summary of Significant Accounting Policies

Description of Business

Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, enables governments and enterprises around the world to give digital identities to media and objects that computers can sense and recognize and to which they can react. The Company’s inventions provide the means to infuse persistent digital information, perceptible only to computers and digital devices, into all forms of media content. The unique digital identifier placed in media generally persists with it regardless of the distribution path and whether it is copied, manipulated or converted to a different format, and does not affect the quality of the content or the enjoyment or other traditional uses of it. The Company’s technology permits computers and digital devices to quickly and reliably identify relevant data from vast amounts of media content.

Principles of Consolidation

The consolidated financial statements include the accounts of Digimarc and its wholly-owned subsidiary. All intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires Digimarc to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Certain of the Company’s accounting policies require higher degrees of judgment than others in their application. These include revenue recognition on long-term license and service contracts, goodwill, impairments and estimation of useful lives of long-lived assets, contingencies and litigation, patent costs, stock-based compensation and income taxes. Digimarc bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Cash Equivalents

The Company considers all highly liquid marketable securities with original maturities of 90 days or less at the date of acquisition to be cash equivalents. Cash equivalents include money market funds, certificates of deposit, commercial paper, and pre-refunded municipal bonds totaling $5,878 and $2,992 at December 31, 2012 and 2011, respectively. Cash equivalents are carried at cost or amortized cost, which approximates market.

Marketable Securities

The Company considers all investments with original maturities over 90 days that mature in less than one year from the balance sheet date to be short-term marketable securities. Both short- and long-term marketable securities primarily include U.S. federal agency notes, U.S. treasuries, corporate notes, pre-refunded municipal bonds, and commercial paper. The Company’s marketable securities are classified as held-to-maturity and are reported at amortized cost, which approximates market.

A decline in the market value of any security below amortized cost that is deemed to be other-than-temporary results in a reduction in the carrying amount. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating that the cost of the investment is recoverable outweighs evidence to the contrary. There have been no other-than-temporary impairments identified or recorded by the Company.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using a method that approximates the effective interest method. Under this method, dividend and interest income are recognized when earned.

Fair Value of Financial Instruments

Accounting Standards Certification (“ASC”) 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the U.S., and enhances disclosures about fair value measurements. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

• Level 1—Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date.

• Level 2—Pricing inputs are quoted for similar investments, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.

• Level 3—Pricing inputs are unobservable for the investment; that is, the inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The estimated fair values of the Company’s financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate their carrying values due to the short-term nature of these instruments. The Company records marketable securities at amortized cost, which approximates fair value.

The Company’s fair value hierarchy for its cash equivalents and marketable securities as of December 31, 2012 and 2011, respectively, was as follows:

December 31, 2012	Level 1		Level 2		Level 3		Total
Money market securities	$	901	$	—	$	—	$	901
Certificates of deposits		—		491		—		491
U.S. treasuries		—		289		—		289
U.S. federal agency notes		—		1,637		—		1,637
Pre-refunded and other municipals		—		22,036		—		22,036
Corporate notes		—		10,100		—		10,100
Commercial paper		—		2,614		—		2,614
Total	$	901	$	37,167	$	—	$	38,068

December 31, 2011	Level 1		Level 2		Level 3		Total
Money market securities	$	896	$	—	$	—	$	896
Certificates of deposits		—		736		—		736
U.S. treasuries		—		718		—		718
U.S. federal agency notes		—		7,942		—		7,942
Pre-refunded and other municipals		—		2,800		—		2,800
Corporate notes		—		16,459		—		16,459
Commercial paper		—		3,400		—		3,400
Total	$	896	$	32,055	$	—	$	32,951

The fair value maturities of the Company’s cash equivalents and marketable securities as of December 31, 2012 are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5-10 years		More than 10 years
Maturities	$	38,068	$	31,200	$	6,868	$	—	$	—

Concentrations of Business and Credit Risk

A significant portion of the Company’s business depends on a limited number of large contracts. The loss of any large contract may result in loss of revenue and margin on a prospective basis. Financial instruments that potentially subject Digimarc to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and trade accounts receivable. Digimarc places its cash and cash equivalents with major banks and financial institutions and at times deposits may exceed insured limits. Other than cash used for operating needs, which may include short-term marketable securities with the Company’s principal banks, Digimarc’s investment policy limits its credit exposure to any one financial institution or type of financial instrument by limiting the maximum of 5% of its cash equivalents and marketable securities or $1,000, whichever is greater, to be invested in any one issuer except for the U.S. government, U.S. federal agencies and U.S. backed securities, which have no limits, at the time of purchase. The Company’s investment policy also limits its credit exposure by limiting the maximum of 40% of its cash and cash equivalents and marketable securities, or $15,000, whichever is greater, to be invested in any one industry category, (e.g., financial or energy industries), at the time of purchase. As a result, Digimarc’s credit risk associated with cash and cash equivalents and marketable securities is believed to be minimal.

Equity Method Investments

The Company accounts for its joint ventures under the equity method of accounting pursuant to ASC 323 “Investments – Equity Method and Joint Ventures.” Under the equity method, investments are carried at cost, plus or minus the Company’s proportionate share, based on present ownership interests, of: (a) the investee’s profit or loss after the date of acquisition; (b) changes in the Company’s equity that have not been recognized in the investee’s profit or loss; and (c) certain other adjustments. Distributions received from the investee (such as dividends) reduce the carrying amount of the investment.

Goodwill

The Company accounts for business combinations under the acquisition method of account in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.

Contingent consideration is recorded at the acquisition date based upon the estimated fair value of the contingent payments. The fair value of the contingent consideration is re-measured each reporting period with any adjustments in fair value being recognized in earnings from operations.

The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company reviews goodwill in June of each year, or on an interim basis if required, for impairment to determine if events or changes in business conditions indicate that the carrying value of the goodwill may not be recoverable. Such reviews assess the fair value of the assets compared to the carrying values.

Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of ASC 360 “Property, Plant and Equipment.” This statement requires that long-lived assets, including definite-lived intangible assets, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset over its remaining useful life. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Through December 31, 2012, there have been no such impairment losses.

Research and Development

Research and development costs are expensed as incurred in accordance with ASC 730 “Research and Development.”

Software Development Costs

Under ASC 985 “Software,” software development costs are to be capitalized beginning when a product’s technological feasibility has been established and ending when a product is made available for general release to customers. To date, the establishment of technological feasibility of the Company’s products has occurred shortly before general release and, therefore, software development costs qualifying for capitalization have been immaterial. Accordingly, the Company has not capitalized any software development costs and has charged all such costs to research and development expense.

Patent Costs

Costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at award date, which varies depending on the pendency period of the application, generally approximating seventeen years. Capitalized patent costs, also referred to as patent prosecution costs, include internal legal labor, professional legal fees, government filing fees and translation fees related to obtaining the Company’s patent portfolio.

Costs associated with the maintenance and annuity fees of patents are accounted for as prepaid assets at the time of payment and amortized over the shorter of the maintenance period or remaining life of the related patent.

Revenue Recognition

See Note 3 for detail disclosures of the Company’s revenue recognition policy.

Stock-Based Compensation

ASC 718 “Compensation – Stock Compensation” requires the measurement and recognition of compensation for all stock-based awards made to employees and directors including stock options and restricted stock based on estimated fair values.

For stock option awards the Company uses the Black-Scholes option pricing model as its method of valuation. The Company’s determination of the fair value on the date of grant is affected by its stock price as well as assumptions regarding a number of highly subjective variables. These variables include, but are not limited to, the expected life of the award, the Company’s expected stock price volatility over the term of the award, the risk-free interest rate and the expected dividend yield. Although the fair value of stock-based awards is determined in accordance with ASC 718 and SAB No. 107 “Shared-Based Payment,” the Black-Scholes option pricing model requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred income taxes reflect the future tax consequences of differences between the tax basis of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not expected to be realized.

The Company is subject to federal and state income taxes within the U.S. and in the ordinary course of business, there are transactions and calculations where the ultimate tax determination is uncertain. The Company is also subject to withholding taxes in various foreign jurisdictions. The withholding taxes are computed by the customers and paid to foreign jurisdictions on our behalf. The Company reports a liability (or contra asset) for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to the unrecognized tax benefits in income tax expense.

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Subsequent Events (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
Subsequent Events (Textual) [Abstract]
Declared quarterly dividend	$ 0.11
Dividend declared date	Feb. 20, 2013
Dividend date of record	Mar. 04, 2013
Dividend date to be paid	Mar. 11, 2013

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Geographical segment revenue
Total	$ 9,314	$ 8,903	$ 9,112	$ 17,046	$ 8,925	$ 8,550	$ 9,473	$ 9,091	$ 44,375	$ 36,039	$ 31,150
Domestic [Member]
Geographical segment revenue
Total									30,736	22,660	19,034
International (1) [Member]
Geographical segment revenue
Total									$ 13,639	$ 13,379	$ 12,116

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Acquisition of Attributor Corporation (Details 2) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Summary of intangible assets acquired in connection with the acquisition
Fair Value	$ 3,020
Amortization Expense	79
Existing technology [Member]
Summary of intangible assets acquired in connection with the acquisition
Fair Value	1,560
Estimated Life	5 years
Amortization Expense	26
Customer relationships [Member]
Summary of intangible assets acquired in connection with the acquisition
Fair Value	290
Estimated Life	7 years
Amortization Expense	3
Backlog [Member]
Summary of intangible assets acquired in connection with the acquisition
Fair Value	760
Estimated Life	2 years
Amortization Expense	32
Tradenames [Member]
Summary of intangible assets acquired in connection with the acquisition
Fair Value	290
Estimated Life	3 years
Amortization Expense	8
Non-solicitation agreements [Member]
Summary of intangible assets acquired in connection with the acquisition
Fair Value	120
Estimated Life	1 year
Amortization Expense	$ 10

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Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Reconciliation of the statutory federal income tax rate to the Company's effective income tax rate
Income taxes computed at statutory rates	$ 4,647	$ 1,316	$ 1,434
Increases (decreases) resulting from:
State income taxes, net of federal tax benefit	705	194	220
Federal and state research and experimentation credits	(122)	(784)	(353)
Change in valuation allowance	12	(2,581)	(1,275)
Transaction costs	65
Impact of federal graduated rates	39
Other	48	69	16
Total tax (benefit) expense	$ 5,394	$ (1,786)	$ 42
Income taxes computed at statutory rates, Percentage	34.00%	34.00%	34.00%
Increases (decreases) resulting from:
State income taxes, net of federal tax benefit, Percentage	5.00%	5.00%	5.00%
Federal and state research and experimentation credits, Percentage	(1.00%)	(20.00%)
Change in valuation allowance, Percentage		(67.00%)	(32.00%)
Transaction costs, Percentage	1.00%
Other, Percentage		2.00%
Total, Percentage	39.00%	(46.00%)	7.00%

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2012

Property and Equipment [Abstract]

Depreciation and amortization on property and equipment using the straight-line method

	December 31, 2012			December 31, 2011
Office furniture and fixtures	$	420		$	410
Equipment		1,886			1,872
Leasehold improvements		1,083			1,041
Gross property and equipment		3,389			3,323
Less accumulated depreciation and amortization		(1,936	)		(1,928	)
Property and equipment, net	$	1,453		$	1,395

Future minimum lease payments under non-cancelable operating leases

Future minimum lease payments under non-cancelable operating leases are as follows:

Year ending December 31:	Operating Leases
2013	$	893
2014		890
2015		920
2016		628
2017		—
Thereafter		—
Total minimum lease payments	$	3,331

Operating leases rent expense

Rent expense on the operating leases are as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Rent expense	$	776	$	866	$	832

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Current:
Federal	$ 4,699	$ 1,066
State	570	3
Foreign	1	(20)	42
Sub-total	5,270	1,049	42
Deferred:
Federal	97	(2,470)
State	27	(365)
Foreign
Sub-total	(284)	(3,640)
Total tax (benefit) expense	$ 5,394	$ (1,786)	$ 42

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Stock Repurchases (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Value of common stock shares repurchased
Private transaction		$ 14,927
Repurchase program	1,201	3,099
Exercise of stock options	1,660	1,651	3,037
Total	4,760	22,048	5,824
Stock Options [Member]
Value of common stock shares repurchased
Tax withholding obligations	949	1,658	2,435
Restricted Shares [Member]
Value of common stock shares repurchased
Tax withholding obligations	$ 950	$ 713	$ 352

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Property and Equipment (Details 1) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Future minimum lease payments under non-cancelable operating leases
2013	$ 893
2014	890
2015	920
2016	628
2017
Thereafter
Total minimum lease payments	$ 3,331

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Stock-Based Compensation (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	2 years
Contractual terms	10 years
Percentage of initial option grants vested	50.00%
Series A Preferred Stock [Member]
Stock-Based Compensation (Textual) [Abstract]
Authorized shares of series A Redeemable Nonvoting Preferred stock	10,000
Series A Preferred redeemable stated fair value	$ 5.00
Restricted Stock [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	4 years
Director [Member]
Stock-Based Compensation (Textual) [Abstract]
Forfeiture Stock options granted to employee and directors	0
Employee [Member]
Stock-Based Compensation (Textual) [Abstract]
Forfeiture Stock options granted to employee and directors	0
Maximum [Member] | Director [Member] | Stock Options [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	2 years
Maximum [Member] | Employee [Member] | Restricted Stock [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	4 years
Maximum [Member] | Employee [Member] | Stock Options [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	4 years
Minimum [Member] | Director [Member] | Restricted Stock [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	1 year
Minimum [Member] | Director [Member] | Stock Options [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	1 year
Minimum [Member] | Employee [Member] | Restricted Stock [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	3 years
Minimum [Member] | Employee [Member] | Stock Options [Member]
Stock-Based Compensation (Textual) [Abstract]
Stock options granted for employee and director vesting period	3 years

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Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deferred tax assets:
Stock based compensation	$ 2,636	$ 1,976
Federal and state net operating losses	1,900
Goodwill	1,146	1,254
Accrued compensation	50
Deferred rent	170	190
Federal and state research and experimentation credits		458
Other		21
Total gross deferred tax assets	5,902	3,899
Less valuation allowance	(184)	0
Net deferred tax assets	5,718	3,899
Deferred tax liabilities:
Patent expenditures	(1,385)	(1,051)
Fixed asset differences	(167)	(13)
Intangible asset differences	(506)	(13)
Other	(18)	(13)
Total deferred tax liabilities	(2,076)	(1,064)
Net deferred tax asset	$ 3,642	$ 2,835

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Defined Contribution Pension Plan

12 Months Ended

Dec. 31, 2012

Defined Benefit Plan, Assets for Plan Benefits [Abstract]

Defined Contribution Pension Plan

(13) Defined Contribution Pension Plan

The Company sponsors an employee savings plan (the “Plan”) which qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. The Plan combines both an employee savings plan and company matching plan into one plan under Section 401(k), including a 401(k) Roth option. Employees become eligible to participate in the Plan at the beginning of the month following the employee’s hire date. Employees may contribute up to 75% of their pay to the Plan, subject to the limitations of the Internal Revenue Code. Company matching contributions are mandatory. The previous Plan was terminated as of December 31, 2008.

The Company made matching contributions in the aggregate amount as follows:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Matching contributions	$	366	$	349	$	323

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Trade Accounts Receivable and Allowance for Doubtful Accounts

12 Months Ended

Dec. 31, 2012

Trade Accounts Receivable and Allowance for Doubtful Accounts [Abstract]

Trade Accounts Receivable and Allowance for Doubtful Accounts

(9) Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

	December 31, 2012		December 31, 2011
Trade accounts receivable	$	4,216	$	3,502
Allowance for doubtful accounts		—		—
Trade accounts receivable, net	$	4,216	$	3,502
Unpaid deferred revenue included in accounts receivable	$	1,589	$	2,084

Allowance for doubtful accounts

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade accounts receivable. The Company determines the allowance based on historical write-off experience and current information. The Company reviews its allowance for doubtful accounts monthly. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Unpaid deferred revenue

The unpaid deferred revenue that are included in trade accounts receivable are billed in accordance with the provisions of the contracts with the Company’s customers. Unpaid deferred revenue from the Company’s cash-basis customers are not included in trade accounts receivable nor deferred revenue accounts.

Major customers

Customers who accounted for more than 10% of trade accounts receivable, are as follows:

	December 31, 2012			December 31, 2011
Central Banks		30	%		45	%
Nielsen		24	%		29	%
Civolution		14	%		14	%

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Property and Equipment (Details Textual)	12 Months Ended
	Dec. 31, 2012
Maximum [Member]
Property Equipment (Textual) [Abstract]
Estimated useful lives of the assets	7 years
Minimum [Member]
Property Equipment (Textual) [Abstract]
Estimated useful lives of the assets	2 years

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(16) Commitments and Contingencies

Certain of the Company’s product license and services agreements include an indemnification provision for claims from third parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASC 450 “Contingencies.” To date, there have been no claims made under such indemnification provisions.

Our newly acquired subsidiary, Attributor, is a defendant in a patent infringement lawsuit brought by Blue Spike, LLC (E.D. Texas, Civil Action No: 6:12-cv-540). The case was brought against Attributor in August 2012, and was consolidated with other lawsuits brought by Blue Spike into Civil Action No. 6:12-cv-00499.

Blue Spike asserted infringement by Attributor of four patents. Attributor filed an answer denying that it has infringed any valid claim of the patents in suit, and asserting specified defenses, including non-infringement and invalidity.

The court is consolidating cases that Blue Spike brought against over sixty defendants into one case. After that process is complete, a schedule should be set.

Blue Spike has not alleged a specific amount of monetary damages in its Complaint.

The Company is subject from time to time to other legal proceedings and claims arising in the ordinary course of business.

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Joint Ventures and Related Party Transactions

12 Months Ended

Dec. 31, 2012

Joint Ventures and Related Party Transactions [Abstract]

Joint Ventures and Related Party Transactions

(14) Joint Venture and Related Party Transactions

In June 2009, the Company entered into two joint venture agreements with Nielsen to launch two new companies; TVaura LLC (in which Digimarc holds a 51% ownership interest) and TVaura Mobile LLC (in which Digimarc holds a 49% ownership interest). The two joint venture agreements and a revised patent license agreement expanded and replaced the previous license and services agreement between the Company and Nielsen that had been in operation since late 2007. Under the new agreements, the Company and Nielsen agreed to work together to develop new products and services, including the expansion and deployment of those products and services that were in development under the prior agreement.

Under the terms of the patent license agreement, Nielsen agreed to pay Digimarc $18,750 during the period from July 2009 through January 2014, and Digimarc granted to Nielsen a non-exclusive license to Digimarc’s patents for use within Nielsen’s business. Unless earlier terminated in accordance with the agreement, the license will continue until the expiration of the last to expire of the licensed patents. The payment terms extend beyond the Company’s normal 30 to 60 day payment terms, thus the license revenue is being recognized when the installments are due.

The Company provided technical and development services to the joint ventures totaling $6,848 during the period 2009 through 2012. Service revenue was recognized as the services are performed.

The Company and Nielsen each made initial cash contributions aggregating $3,500 payable quarterly from July 2009 through July 2011 to fund TVaura LLC and initial cash contributions aggregating $2,500 payable quarterly from July 2009 through July 2011 to fund TVaura Mobile LLC.

In March 2012, Digimarc and Nielsen decided to reduce the investments in their two joint ventures to minimal levels while assessing alternative approaches to achieving each of their goals in the emerging market opportunity of synchronized second screen television. In connection with this plan for the suspension of operations, the joint ventures accrued estimated expenses for the first quarter’s operations and severance costs for joint venture employees. Digimarc’s share of the one-time severance and suspension costs was approximately $500. Pursuant to the plan of suspending operations of the joint ventures with Nielsen, in April 2012 the Company received $104 of remaining cash from TVaura LLC and contributed $796 to TVaura Mobile LLC to fund both the first quarter’s operating expenses as well as the suspension related costs. Payment of all expenses incurred after the suspension of operations of each joint venture is unconditionally the responsibility of the majority owner, which expenses for TVaura LLC, if any, will be paid by Digimarc. As of December 31, 2012, both Digimarc and Nielsen continued to assess the market opportunities of each of the joint ventures.

The investment in joint ventures account balances have been reduced to $0 as of December 31, 2012.

Pursuant to the terms of the agreements and ASC 810 “Consolidation,” the joint ventures are not consolidated with the Company because the minority member has substantive participating rights, or veto rights, such that no member has majority control.

Related Party Transactions

	Year Ended December 31, 2012			Year Ended December 31, 2011		Year Ended December 31, 2010
TVaura LLC:
Capital contributions (return of capital)	$	(104	)	$	1,200	$	1,600
Revenue (1)	$	—		$	2,640	$	2,723
TVaura Mobile LLC:
Capital contributions	$	796		$	900	$	1,200
Revenue (1)	$	272		$	—	$	—
Total:
Capital contributions, net	$	692		$	2,100	$	2,800
Revenue (1)	$	272		$	2,640	$	2,723

(1) Technical and development services

Summarized financial data for TVaura LLC:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Current assets	$	—	$	402	$	777
Noncurrent assets	$	—	$	22	$	31
Current liabilities	$	—	$	169	$	255
Noncurrent liabilities	$	—	$	—	$	—

	Year Ended   December 31,   2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Revenue	$	—		$	—		$	—
Gross profit	$	—		$	—		$	—
Operating expenses	$	52		$	2,699		$	2,825
Net loss from continuing operations	$	(52	)	$	(2,699	)	$	(2,824	)
The Company’s pro-rata share – net loss	$	(27	)	$	(1,376	)	$	(1,440	)
The Company’s gain on investment	$	70		$	—		$	—

Summarized financial data for TVaura Mobile LLC:

	Year Ended December 31, 2012		Year Ended December 31, 2011		Year Ended December 31, 2010
Current assets	$	937	$	1,308	$	1,913
Noncurrent assets	$	—	$	—	$	—
Current liabilities	$	957	$	720	$	382
Noncurrent liabilities	$	—	$	—	$	—

	Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Revenue	$	—		$	105		$	—
Gross profit	$	—		$	105		$	—
Operating expenses	$	2,266		$	2,848		$	1,532
Net loss from continuing operations	$	(2,266	)	$	(2,743	)	$	(1,532	)
The Company’s pro-rata share – net loss	$	(1,100	)	$	(1,338	)	$	(740	)
The Company’s loss on investment	$	(50	)	$	—		$	—

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Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Feb. 15, 2013	Jun. 29, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	Digimarc CORP
Entity Central Index Key	0001438231
Document Type	10-K/A
Document Period End Date	Dec. 31, 2012
Amendment Flag	true
Amendment Description	Digimarc Corporation is filing this Amendment No. 1 (“Amendment No. 1”) to our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the “Form 10-K”) in response to comments received from the Staff of the Securities and Exchange Commission regarding (i) the Form 10-K, and (ii) a request for confidential treatment of certain portions of Exhibit 10.2 originally filed with the Form 10-K. We are filing this Amendment No. 1 solely to re-file Exhibit 10.2, re-file Exhibit 23.1 and amend and restate Part II Item 8 and Part IV Item 15 included in the Form 10-K. In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, we are filing new certifications by the Company’s principal executive officer and principal financial officer as exhibits to this Amendment No. 1. Except as described above, no other amendments or updates have been made to the Form 10-K as originally filed. This Amendment No. 1 does not reflect events after the original filing of the Form 10-K and does not modify or update any disclosures in the Form 10-K that may have been affected by subsequent events.
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 174
Entity Common Stock, Shares Outstanding		7,281,983

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Income Taxes (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary reconciliation of the Company's uncertain tax positions
Beginning balance	$ 102
Addition for current year tax positions	6	30
Addition for prior year tax positions		72
Settlements with taxing authorities
Lapsing of statutes of limitations
Ending balance	$ 108	$ 102

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

(15) Income Taxes

For the year ended December 31, 2012, the provision for income taxes reflects current tax expense, deferred tax expense and withholding tax expense in various foreign jurisdictions. The withholding taxes are computed by the Company’s customers and paid to foreign jurisdictions on the Company’s behalf. The effective tax rate for the year ended December 31, 2012 was 39%. Excess tax benefits associated with stock compensation are being utilized in the current year to offset tax payable and credit additional paid-in capital.

For the year ended December 31, 2011, the provision for income taxes reflects current tax expense, deferred tax benefit and withholding tax expense in various foreign jurisdictions. The effective tax rate for the year ended December 31, 2011 was a tax benefit of 46%. Excess tax benefits associated with stock compensation were being utilized in 2011 to offset tax payable and credit additional paid-in capital. The Company recognized a deferred tax benefit of $2,581 during the year ended December 31, 2011 as a result of releasing the valuation allowance on deferred tax assets. The Company concluded, based on an analysis of all the facts, including projections of future income, that it was more likely than not that all of its deferred tax assets will be realized.

Components of tax expense (benefit) allocated to continuing operations include the following:

	Year Ended December 31, 2012		Year Ended December 31, 2011			Year Ended December 31, 2010
Current:
Federal	$	4,699	$	1,066		$	—
State		570		3			—
Foreign		1		(20	)		42
Sub-total		5,270		1,049			42
Deferred:
Federal		97		(2,470	)		—
State		27		(365	)		—
Foreign		—		—			—
Sub-total		124		(2,835	)		—
Total tax (benefit) expense	$	5,394	$	(1,786	)	$	42

The reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:

	Year Ended December 31, 2012			%			Year Ended December 31, 2011			%			Year Ended December 31, 2010			%
Income taxes computed at statutory rates	$	4,647			34	%	$	1,316			34	%	$	1,434			34	%
Increases (decreases) resulting from:
State income taxes, net of federal tax benefit		705			5	%		194			5	%		220			5	%
Federal and state research and experimentation credits		(122	)		(1	)%		(784	)		(20	)%		(353	)		—
Change in valuation allowance		12			—			(2,581	)		(67	)%		(1,275	)		(32	)%
Transaction costs		65			1	%		—			—			—			—
Impact of federal graduated rates		39			—			—			—			—			—
Other		48			—			69			2	%		16			—
Total	$	5,394			39	%	$	(1,786	)		(46	)%	$	42			7	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising the Company’s deferred tax assets and deferred tax liabilities are as follows:

	December 31, 2012			December 31, 2011
Deferred tax assets:
Stock based compensation	$	2,636		$	1,976
Federal and state net operating losses		1,900			—
Goodwill		1,146			1,254
Accrued compensation		50			—
Deferred rent		170			190
Federal and state research and experimentation credits		—			458
Other		—			21
Total gross deferred tax assets		5,902			3,899
Less valuation allowance		(184	)		—
Net deferred tax assets	$	5,718		$	3,899
Deferred tax liabilities:
Patent expenditures	$	(1,385	)	$	(1,051	)
Fixed asset differences		(167	)		(13	)
Intangible asset differences		(506	)		(13	)
Other		(18	)		(13	)
Total deferred tax liabilities	$	(2,076	)	$	(1,064	)
Net deferred tax assets	$	3,642		$	2,835

For the year ended December 31, 2012, the Company acquired 100% of the outstanding stock of Attributor Corporation in a non-taxable transaction. Due to Attributor’s history of losses and the inability to utilize Attributor losses to offset the Company’s income for state tax purposes, the Company concluded that it is not more likely than not that the Attributor state deferred tax assets will be realized and a full valuation allowance has been recorded on the state deferred tax assets of Attributor. The valuation allowance recorded as of December 31, 2012 and 2011 is $184 and $0, respectively, and relates to state deferred tax assets acquired as part of the Attributor acquisition.

For the year ended December 31, 2011, the Company determined that it was more likely than not that the net deferred tax assets would be realized and the entire valuation allowance in the amount of $2,581 was released.

As of December 31, 2012, the Company has federal and state net operating loss carry-forwards of $4,873 and $4,873, respectively, which have a carry-forward of 8 – 20 years depending on the jurisdiction. The deferred tax assets, before valuation allowance, for federal and state net operating loss carryforwards acquired in the Attributor acquisition have been reduced to the amount of losses allowed to be utilized in the post-acquisition period before expiration after considering the applicable limitations of IRC Sec. 382. As of December 31, 2012, the Company has federal and state research and experimental tax credits of $49 and $12, respectively, which have a carry-forward of 5 – 19 years depending on the jurisdiction and for which the benefits upon usage will be recorded in additional paid-in capital from the effects of stock options. As of December 31, 2012, the Company has foreign tax credits of $56 which have a carry-forward of 7 – 9 years and for which the benefits upon usage will be recorded in additional paid-in capital from the effects of stock options.

The Company records accrued interest and penalties associated with uncertain tax positions in income tax expense in the consolidated statements of operations. On initial adoption of ASC 740 and through December 31, 2010, the Company recognized no uncertain tax positions nor accrued interest and penalties associated with uncertain tax positions. For the years ended December 31, 2012 and 2011, the Company recognized uncertain tax positions and no accrued interest and penalties associated with uncertain tax positions. The Company does not anticipate any unrecognized benefits that will significantly increase or decrease within the next 12 months.

A summary reconciliation of the Company’s uncertain tax positions is as follows:

	December 31, 2012		December 31, 2011
Beginning balance	$	102	$	—
Addition for current year tax positions		6		30
Addition for prior year tax positions		—		72
Settlements with taxing authorities		—		—
Lapsing of statutes of limitations		—		—
Ending balance	$	108	$	102

The balance for uncertain tax positions is classified as a long-term liability on the consolidated balance sheet. All uncertain tax positions if reversed would affect the effective tax rate.

The Company is subject to examination in the federal jurisdiction for the tax years ending December 31, 2012, 2011 and 2010 and other state jurisdictions for the tax years ending December 31, 2012, 2011, 2010, 2009 and 2008.

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Net Income Per Common Share (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Basic EPS
Income available to common shareholders	$ 1,054	$ 1,003	$ 1,216	$ 4,999	$ 453	$ 639	$ 3,626	$ 938	$ 8,272	$ 5,656	$ 4,174
Income available to common shareholders, Shares	6,791	6,761	6,737	6,738	6,699	6,706	6,696	6,864	6,757	6,741	7,120
Income available to common shareholders, Per Share										$ 0.84	$ 0.59
Diluted EPS
Income available to common shareholders	$ 1,054	$ 1,003	$ 1,216	$ 4,999	$ 453	$ 639	$ 3,626	$ 938	$ 8,272	$ 5,656	$ 4,174
Income available to common shareholders, Shares	6,966	6,984	6,993	7,140	7,279	7,344	7,245	7,505	6,989	7,430	7,623
Income available to common shareholders, Per Share										$ 0.76	$ 0.55
Stock Options [Member]
Effect of Dilutive Securities
Effect of Dilutive Securities										393	440
Restricted Stock [Member]
Effect of Dilutive Securities
Effect of Dilutive Securities										296	63

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Net Income Per Common Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Basic EPS:
Net income/loss	$ 1,054	$ 1,003	$ 1,216	$ 4,999	$ 453	$ 639	$ 3,626	$ 938	$ 8,272	$ 5,656	$ 4,174
Less: Net income allocable to participating securities									(426)
Net income allocable to common shares									7,846
Weighted average common shares outstanding-basic	6,791	6,761	6,737	6,738	6,699	6,706	6,696	6,864	6,757	6,741	7,120
Basic earnings per common share	$ 0.15	$ 0.14	$ 0.17	$ 0.74	$ 0.07	$ 0.10	$ 0.54	$ 0.14	$ 1.16	$ 0.84	$ 0.59
Diluted EPS:
Net income/loss	1,054	1,003	1,216	4,999	453	639	3,626	938	8,272	5,656	4,174
Less: Net income allocable to participating securities									(426)
Net income allocable to common shares									$ 7,846
Weighted average common shares outstanding-basic	6,791	6,761	6,737	6,738	6,699	6,706	6,696	6,864	6,757	6,741	7,120
Dilutive effect of non-participating securities									232
Weighted average common shares outstanding - dilutive	6,966	6,984	6,993	7,140	7,279	7,344	7,245	7,505	6,989	7,430	7,623
Diluted earnings per common share	$ 0.14	$ 0.14	$ 0.17	$ 0.70	$ 0.06	$ 0.09	$ 0.50	$ 0.12	$ 1.12	$ 0.76	$ 0.55

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Income Taxes (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Taxes (Textual) [Abstract]
Effective tax rate	39.00%	(46.00%)	7.00%
State deferred tax assets, valuation allowance	$ 184	$ 0
Deferred tax benefit	27	(365)
Deferred tax benefit on release of valuation allowance		2,581
State net operating loss carry-forwards, Domestic	4,873
Deferred net operating loss carry-forwards, State and Local	4,873
Minimum maturity period for federal net operating loss carry-forwards	8 years
Maximum maturity period for federal net operating loss carry-forwards	20 years
Minimum maturity period for state net operating loss carry-forwards	8 years
Maximum maturity period for state net operating loss carry-forwards	20 years
Federal research and experimental tax credit	49
Minimum maturity period for federal research and experimental tax credit carryovers	5 years
Maximum maturity period for federal research and experimental tax credit carryovers	19 years
State research and experimental tax credit	12
Minimum maturity period for state research and experimental tax credit carryovers	5 years
Maximum maturity period for state research and experimental tax credit carryovers	19 years
Foreign tax credits	$ 56
Minimum maturity period for foreign tax credit carryovers	7 years
Maximum maturity period for foreign tax credit carryovers	9 years
Acquisition of outstanding stock of Attributor Corporation	100.00%