DMRC Lawsuit Alert! Class Action Lawsuit Against Digimarc Corporation

A class action lawsuit was filed against Digimarc Corporation (DMRC) by Levi & Korsinsky on May 8, 2025. The plaintiffs (shareholders) alleged that they bought DMRC stock at artificially inflated prices between May 3, 2024 and February 26, 2025 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Digimarc stock during that period can click here to learn about joining the lawsuit.

Digimarc enables product digitization by providing unique identities and cloud-based solutions. Its offerings include digital watermarking technology, as well as protection, identification, tracking, and authentication of digital files. For instance, the company launched a series of invisible barcodes in partnership with major retailer Walmart (WMT) for use during the self-checkout process.

The company’s failure to inform investors about the renegotiation of contract terms with a large commercial partner is at the heart of the current complaint.

Digimarc’s Misleading Claims

According to the lawsuit, Digimarc and two of its senior officers (the Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about a contract renewal with one of the company’s largest partners, and ancillary issues, from SEC filings and related material.

During the Class Period, the CEO stated that Digimarc’s Annual Recurring Revenue (ARR) saw an 85% year-over-year growth in Q1FY24. Additionally, its commercial subscription revenue rose by 52%, and the subscription gross profit margin widened to 87% compared to Q1FY23.

Furthermore, in a quarterly report filed on August 13, 2024, the company explained that Subscription revenue included revenue earned from subscription fees for access to its SaaS (Software-as-a-Service) platform and products. This did not include licensing fees for Digimarc’s software products. The company added that the majority of subscription contracts are recurring, paid in advance, and recognized over the term of the subscription, which typically spans up to three years.

Finally, in a quarterly report dated November 14, 2024, Digimarc mentioned that its ARR fell 5% year-over-year due to “the delayed timing in the anticipated renewal of a commercial contract.” Even then, the company failed to inform investors regarding the possibility of lost revenue resulting from contract renegotiations.  

Plaintiffs’ Arguments

The plaintiffs maintain that the defendants deceived investors by lying and withholding critical information about the business practices and prospects during the Class Period. Importantly, the defendants are accused of misleading investors about the potential decline in ARR due to the renegotiation of contract terms with a major commercial partner.

The information became clear on February 26, 2025, when Digimarc released its fourth quarter and full year fiscal 2024 results. The company reported a 10% year-over-year decline in ARR to $20 million from $22.23 million. Digimarc attributed the decline to “a $5.8 million decrease in ARR due to the expiration of a commercial contract in June 2024.” Following the news, DMRC stock plunged 43.1% the next day.

To conclude, the company misled investors about the potential impact on its financial performance resulting from renegotiation of terms with a large commercial partner. Owing to these issues, DMRC stock has declined 66.6% so far this year.