8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): August 20, 2008

DOCUMENT SECURITY SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

New York	1-32146	16-1229730
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

First Federal Plaza, Suite 1525 28 East Main Street Rochester, NY	14614
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (585) 325-3610

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01Entry into a Material Definitive Agreement

On August 20, 2008, Document Security Systems, Inc. (the “Registrant” or “DMC”) entered into an agreement (the “Agreement”) with Trebuchet Capital Partners, LLC (“Trebuchet”). Pursuant to the Agreement, Trebuchet has agreed to pay substantially all of the litigation costs associated with pending validity proceedings initiated by the European Central Bank (“ECB”) in eight European countries relating to a European patent that DMC has claimed the ECB infringed in printing of the Euros currency (the “Patent”). Trebuchet has also agreed to pay substantially all of the litigation costs associated with future validity challenges filed by the ECB or other parties, provided that Trebuchet elects to assume the defense of any such challenges, in its sole discretion, and patent infringement suits filed against the ECB and certain other alleged infringers of the Patent, all of which suits may be brought at the sole discretion of Trebuchet and may be in the name of DMC, Trebuchet or both of them. DMC has provided Trebuchet with the sole and exclusive right to manage infringement litigation relating to the Patent in Europe, including the right to initiate litigation in the name of DMC, Trebuchet or both of them and to choose whom and where to sue, subject to certain limitations set forth in the Agreement.

Trebuchet has further paid in full DMC’s existing obligation, in the amount of $500,000 plus accrued interest, owed to Taiko III Corp. (“Taiko”), under a credit facility note that DMC and Taiko entered into in May 2008. Trebuchet has also purchased 100,000 shares of DMC’s common stock, subject to the American Stock Exchange approving the listing of such shares, for an aggregate purchase price of $400,000, the proceeds of which will be used by DMC to pay existing, accrued costs related to the Litigation.

Under the terms of the Agreement, and in consideration for Trebuchet’s funding obligations, DMC assigned a 49% interest in the Patent to Trebuchet which Trebuchet holds as a separate and exclusive interest including a separate and distinct right to exploit the Patent. DMC has agreed to promptly file all documents necessary to complete the assignment of this interest in the Patent to Trebuchet. DMC also has agreed not to transfer any of its rights in the remaining 51% interest in the Patent nor enter into licenses with third parties with respect to the Patent, without the prior written consent of Trebuchet.

Under the terms of the Agreement, DMC and Trebuchet have agreed to equally share all proceeds generated from litigation relating to the Patent, including judgments and licenses or other arrangements entered into in settlement of any such litigation. Trebuchet is also entitled to recoup any litigation expenses specifically awarded by the courts in such actions.

DMC has also granted to Trebuchet a first priority right and security interest in its 51% interest in the Patent and in its portion of the revenues payable to it under the terms of the Agreement in order to secure Trebuchet’s interest in all amounts payable to Trebuchet under the Terms of the Agreement.

The Agreement may be terminated at any time by the mutual agreement of Trebuchet and DMC. Trebuchet also may terminate the Agreement as a result of (1) a bankruptcy event with respect to DMC, (2) any material misrepresentation of the representations and warranties of DMC in the Agreement to the extent that such misrepresentation adversely affects the rights of Trebuchet, (3) in the event that the appeal in each of the patent validity proceedings in Germany and the Netherlands favors the ECB and the Patent is held invalid in both countries or (4) the Patent is not held valid after exhausting appeals in at least one country in the European Union in which proceedings can be brought against any potential defendant identified in Agreement.

The Agreement also contains customary representations and warranties by each of DMC and Trebuchet and DSS has agreed to indemnify Trebuchet for any material misrepresentation of its representations and warranties in the Agreement.

Trebuchet is owned by the Ergonomic Group, Inc., a private company that has a long-standing strategic relationship with, and substantial interest in, DMC. Robert Girards, a senior executive and director of the Ergonomic Group, is the Managing Partner of Trebuchet and owner of Taiko.

On August 21, 2008, the Registrant issued a press release regarding the Agreement, a copy of which is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Document
99.1	Press Release of the Registrant dated August 21, 2008.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DOCUMENT SECURITY SYSTEMS, INC.
Dated: August 26, 2008	By:	/s/ Patrick A. White
		Patrick A. White
		Chief Executive Officer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release of the Registrant dated August 21, 2008.

EX-99.1

Contacts:

Document Security Systems	Trebuchet Capital Partners, LLC
Name: Jody Buffering	Name: Richard Wolff
Lippert/Heilshorn & Associates, Inc.	Phone: (646) 284-9444
Phone: (212) 838-3777	Email: rwolff@hfgcg.com
Email: jburfening@lhai.com

Document Security Systems and Trebuchet Capital Partners Enter into

Comprehensive Agreement Related to European Patent Litigation Initiatives

ROCHESTER, N.Y. — August 21, 2008 — Document Security Systems, Inc. (AMEX: DMC), a leader in patented protection against counterfeiting, unauthorized copying, scanning and photo imaging, and Trebuchet Capital Partners, LLC announced today that they have entered into a comprehensive agreement whereby Trebuchet will fund and manage Document Security Systems’ previously reported European patent validity and infringement lawsuits against the European Central Bank (“ECB”) and other governmental and private sector entities.

Trebuchet Capital Partners will provide significant financial and management resources to oversee all such matters in Europe for Document Security Systems. In addition, Trebuchet has the authority to prosecute and resolve on behalf of Document Security Systems any existing and future challenges to the validity of the disputed patent and related infringement and damages considerations.

Trebuchet is owned by the Ergonomic Group, Inc., a private company that has a long-standing strategic relationship with, and substantial interest in, Document Security Systems. Robert Girards, a senior executive and director of the Ergonomic Group, is the Managing Partner of Trebuchet.

Patrick White, Chief Executive Officer of Document Security Systems, stated, “We are pleased to announce this partnership with Trebuchet Capital Partners as we actively move ahead with the prosecution of our European patent validity, infringement and damage litigations. This agreement meets our strategic goal of substantially eliminating the burden of these costs from our company, while funding our broader objectives of protecting and monetizing our proprietary intellectual property. We believe that the outcome in successfully prosecuting pending and anticipated matters in Europe with Trebuchet will ultimately be favorable to Document Security Systems.”

Document Security Systems has claimed that multiple entities in Europe, including the ECB, have infringed the Company’s European Patent No. 0455750 (the “European Patent”) with respect to the Euro and certain other world currencies. In March 2006, the ECB initiated proceedings to invalidate the European Patent, which resulted in that patent being declared valid in Germany and The Netherlands and invalid in the United Kingdom and France. The determinations in Germany, The Netherlands and France are subject to appeal.

To the extent that proceeds are generated from Trebuchet’s efforts under the litigation agreement, Document Security Systems and Trebuchet Capital Partners will share equally in all such proceeds as determined under the formal terms of the litigation agreement. Additionally, under the agreement, Trebuchet will receive 100,000 shares of Document Security Systems common stock, subject to approval of the American Stock Exchange of the listing of the 100,000 shares, which Document Security Systems will use to pay approximately $400,000in past litigation expenses accrued by Document Security Systems, Additionally, Trebuchet will pay in full the $500,000 loan, plus accrued interest, that Document Security Systems owes to Taiko III Corp., a company owned by Mr. Girards. Trebuchet, to secure its interest under the litigation agreement, has been granted an undivided 49% interest in the European Patent and rights thereunder.

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About Document Security Systems, Inc.

A rapidly growing security technology company, Document Security Systems is a world leader in the development of optical deterrent technologies that help prevent counterfeiting and brand fraud from the use of the most advanced scanners, copiers and imaging systems in the market. The company’s patented and patent-pending technologies protect valuable documents and printed products from counterfeiters and identity thieves. Document Security Systems’ customers, which include international governments, major corporations and world financial institutions, use its covert and overt technologies to protect a number of applications including, but not limited to, currency, vital records, brand protection, ID Cards, internet commerce, passports and gift certificates. Document Security Systems’ strategy is to become the world’s leading producer of cutting-edge security technologies for paper, plastic and electronically generated printed assets. More information about Document Security Systems can be found at its websites: www.documentsecurity.com and www.plasticprintingprofessionals.com.

About Trebuchet Capital Partners, LLC

Trebuchet Capital Partners is a special purpose vehicle organized for the specific purpose of entering into the agreement with Document Security Systems regarding patent infringement and validity lawsuits in Europe and related matters.

Safe Harbor Statement

This press release contains forward-looking statements regarding expectations for future financial performance, which involve uncertainty and risk. It is possible the company's future financial performance may differ from expectations due to a variety of factors including, but not limited to, changes in economic and business conditions in the world, increased competitive activity, achieving sales levels to fulfill revenue expectations, consolidation among its competitors and customers, technology advancements, unexpected costs and charges, adequate funding for plans, changes in interest and foreign exchange rates, regulatory and other approvals and failure to implement all plans, for whatever reason. It is not possible to foresee or identify all such factors. Any forward-looking statements in this report are based on current conditions; expected future developments and other factors it believes are appropriate in the circumstances. Prospective investors are cautioned that such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected. The company makes no commitment to update any forward-looking statement included herein, or disclose any facts, events or circumstances that may affect the accuracy of any forward-looking statement.

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