Exhibit 10.3

DIGIMARC CORPORATION 1999 STOCK INCENTIVE PLAN

1999 NON-EMPLOYEE DIRECTOR OPTION PROGRAM  Amended and Restated on April 22, 2001  Amended and Restated on March 29, 2002  Amended and Restated on April 17, 2003  Amended and Restated on
May 2, 2003  Amended and Restated on March 10, 2004

ARTICLE I  ESTABLISHMENT AND PURPOSE OF THE PROGRAM

1.01    Establishment of Program

The 1999 Non-Employee Director Option Program (the "Program") is adopted pursuant to the Digimarc Corporation 1999 Stock Incentive Plan (the "Plan")
and, in addition to the terms and conditions set forth below, is subject to the provisions of the Plan.

1.02    Purpose of Program

The purpose of the Program is to enhance the ability of the Company to attract and retain directors who are not Employees ("Non-Employee Directors")
through a program of automatic Option grants.

1.03    Effective Date of the Program

The Program became effective as of the Registration Date on December 1, 1999, and was first amended and restated by the Board on April 22, 2001 to
increase the number of Shares granted pursuant to Initial Grants and Subsequent Grants (as defined below) and to change the vesting provisions thereunder. The Program was further amended and restated
by the Board on March 29, 2002 to increase the number of Shares granted pursuant to Initial Grants and Subsequent Grants, to award additional Option grants to Non-Employee Directors
serving on committees of the Board, and to change the vesting provisions for all automatic Option grants. The Program was further amended and restated by the Board on April 17, 2003 to specify
that Committee Service Grants shall be made only to Non-Employee Directors who serve as a member of a "standing committee" of the Board. The Program was further amended and restated by the
Board on May 2, 2003 to eliminate the requirement that a Non-Employee Director serve as a director of the Company for at least six (6) months before receiving a Committee
Service Grant. The Program was further amended and restated by the Board on March 10, 2004 to provide that the Board may waive the issuance of option grants under the Program, in whole or in
part, for any particular year.

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ARTICLE II  DEFINITIONS

Capitalized terms in this Program, unless otherwise defined in this Program, have the meaning given to them in the Plan. As used in this Program, the following
definitions shall apply:

2.01    Change in Control

"Change in Control" means a change in ownership or control of the Company effected through either of the following
transactions:



2.02    Continuing Directors

"Continuing Directors" means members of the Board who either (i) have been Board members continuously for a
period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election
as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

2.03    Corporate Transaction

"Corporate Transaction" means any of the following transactions:



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ARTICLE III  OPTION TERMS

3.01    Date of Grant and Number of Shares

(a)Initial Grant.    A Non-Qualified Stock Option to purchase twenty thousand (20,000) shares of
Common Stock shall be granted ("Initial Grant") to each Non-Employee Director elected or appointed to the Board for the first time on or after March 29, 2002. Such Initial Grant
shall be made on the date each such Non-Employee Director first becomes a Non-Employee Director.

(b)Subsequent Grants.    Immediately following each annual meeting of the Company's stockholders commencing with
the annual meeting of the Company's stockholders in 2002, each Non-Employee Director who continues as a Non-Employee Director following such annual meeting shall be granted a
Non-Qualified Stock Option to purchase twelve thousand (12,000) shares of Common Stock (a "Subsequent Grant"); provided that no Subsequent Grant shall be made to any
Non-Employee Director who has not served as a director of the Company, as of the time of such annual meeting, for at least six (6) months. Each such Subsequent Grant shall be made
on the date of the annual stockholders' meeting in question.

(c)Committee Service Grants.    Each Non-Employee Director who serves as a member of a standing
committee of the Board immediately following each annual meeting of the Company's stockholders, commencing with the annual meeting of the Company's stockholders in 2002, shall be granted a
Non-Qualified Stock Option to purchase three thousand (3,000) shares of Common Stock (a "Committee Service Grant"). Non-employee directors shall receive an additional Committee
Service Grant for each individual standing committee of the Board upon which he or she serves as a member as described above. For purposes of this provision, the term "standing committee" of the Board
shall mean the Audit Committee, the Compensation Committee, the Corporate Governance Committee, and the Nominating Committee. Each such Committee Service Grant shall be made on the date of the annual
stockholders' meeting in question.

(d)Waiver of Option Grants.    The Board may waive the issuance of option grants to be made pursuant to this
Section 3.01 of the Program for any particular year, in whole or in part, provided such waiver is made prior to the date of grant of such options. Any waiver by the Board with respect to option
grants for a particular year shall in no way affect the right of Non-Employee Directors to receive option grants under the Program in a subsequent year.

3.02    Vesting

(a)Initial Grant.    Each Initial Grant under the Program shall vest and become exercisable as to
1/36 of the shares of Common Stock subject to the Option on each monthly anniversary of the date of grant, such that the Option will be fully exercisable three (3) years after
its date of grant.

(b)Subsequent Grants and Committee Service Grants.    Each Subsequent Grant and each Committee Service Grant under
the Program shall vest and become exercisable as to 1/12 of the shares of Common Stock subject to the Option on each monthly anniversary of the date of grant, such that the Option will
be fully exercisable one (1) year after its date of grant.

3.03    Exercise Price

The exercise price per share of Common Stock of each Initial Grant and Subsequent Grant shall be one hundred percent (100%) of the Fair Market Value per Share on
the date of grant.

3.04    Corporate Transaction/Change in Control



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3.05    Other Terms

The Plan Administrator shall determine the remaining terms and conditions of the Options awarded under the Program.

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