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Digimarc: Protecting the Future of Content

With the explosion of the Web, there is a desperate need for protecting intellectual property from piracy and counterfeiting. The International Intellectual Property Alliance estimates that US companies lost about $12.4 billion worldwide because of piracy in 1998. The European Commission estimates that more than 5 percent of world trade is lost to counterfeiting.

There is a solution. It is from a company called Digimarc (DMRC) . The current stock price is $43 and the high is $88.

Digimarc specializes in the New Age business of digital watermarking technologies. That is, micro digital code is embedded in printed and digital content -- magazine ads, passports, tickets, stamps, clothing brands, stock certificates, debit cards, etc. -- so there can be instant identification of ownership (detected by special reader software).

The company has been building these technologies since 1996. But since then, the company has been expanding its product line. For example, Digimarc plans to launch its Paper-as-Portal Service. Content producers will place digital watermarks in printed or visual content. A reader can use a device that, as it is pointed it at the content, the Web page will be launched and can be viewed immediately.

So far, the company has been showing impressive growth. Not only are revenues soaring, but losses are narrowing. For the first nine months of 1999, revenues were $4.2 million, up from $691,000 for the same period a year ago. Losses during this time fell from $2.3 million to $824,000.

One indication of the appeal of the company is the investor group: Macrovision, Reuters Group PLC, Adobe, and Softbank Ventures. Digimarc also has a strong customer base, such as National Geographic, Getty Communications, and Fox Broadcasting.

A major barrier to entry is Digimarc's portfolio of patents. The company has 15 US patents, with 59 applications currently on file. There are 17 foreign patents pending.

Digimarc has the potential of becoming the standard for digital watermarking. Actually, the company is an active member of a variety of industry initiatives, such as the Copy Protection Working Group and Digital Imaging Group. If Digimarc does become the standard, then the company is likely to be a tremendous performer.



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