EXHIBIT
10.1  EMPLOYMENT AGREEMENT  THIS EMPLOYMENT AGREEMENT (this Agreement) is made effective as of
July 16, 2001 (the Effective Date) at Tualatin, Oregon between DIGIMARC
CORPORATION, a Delaware corporation (Digimarc) with offices at 19801 SW 72ND
Avenue, Tualatin, OR 97062, and BRUCE DAVIS (Executive).  WITNESSETH:  WHEREAS, Executive is Chief Executive Officer of Digimarc; and  WHEREAS, Digimarc and Executive wish to memorialize the terms of
Executives employment in a written agreement.  NOW, THEREFORE, in consideration of the foregoing and
in consideration of the mutual promises and agreements contained herein, the
parties hereto agree as follows:  1.             PERIOD OF EMPLOYMENT.  Digimarc agrees to employ Executive, and Executive agrees to be so employed,
on the terms and conditions set forth herein for the period beginning on the
Effective Date and ending December 31, 2002, subject to automatic renewal or
early termination as set forth below. 
This Agreement will automatically renew for successive two-year periods
unless terminated by written notice received at least one year prior to any
scheduled termination or expiration of this Agreement.  Term, as used herein shall include the
initial term and any such renewals.  2.             DUTIES AND RESPONSIBILITIES.  a.             Position. 
Executive will serve as Chief Executive Officer of Digimarc in
conformity with general management policies, guidelines and directions issued
by the Board of Directors of Digimarc (the Board), and shall perform all
services appropriate to that position as designated from time to time by the
Board.  Executive will report directly
to the Board, and will have general charge and supervision of those functions
and such other responsibilities as are customary for his position.  As long as Executive serves as Chief
Executive Officer, it is the intention of the Company that he will be nominated
to serve on the Board and, as of the date of the next annual meeting of
shareholders, will be nominated to serve as Chairman of the Board in addition to
continuing to serve as Chief Executive Officer.  b.             Duties.  Executive will work exclusively for Digimarc
on a full-time basis, devoting all of his time and attention during normal
business hours to Digimarcs business. 
Executive will perform his duties and responsibilities hereunder
diligently,   
     faithfully and loyally in order to facilitate the proper, efficient and
successful operation of Digimarcs business.   c.             Other Activity.  Except upon the prior approval of the Board, Executive (during the
Term) shall not (i) accept any other employment; or (ii) engage, directly or
indirectly, in any other business, commercial, or professional activity
(whether or not pursued for pecuniary advantage) that is or may be competitive
with Digimarc, that might create a conflict of interest with Digimarc, or that
otherwise might interfere with the business of Digimarc, or any Affiliate.  An Affiliate shall mean any person or
entity that directly or indirectly controls, is controlled by, or is under
common control with Digimarc.  So that
Digimarc may be aware of the extent of any other demands upon Executives time
and attention, Executive shall disclose in confidence to Digimarc the nature
and scope of any other business activity in which he is or becomes engaged
during the Term.  3.             COMPENSATION AND BENEFITS.  As compensation for Executives services, Executive will receive a cash
salary and bonus and participate in stock-based compensation plans, subject to
the terms and conditions set forth in this Agreement.  a.             Salary.  Executive will be paid a salary of not less
than $300,000 per year payable in such installments as are consistent with
Digimarcs general payroll practices as they may be amended, by Digimarc in its
sole discretion, during the Term. 
Digimarc will review Executives salary prior to the end of each
calendar year during the term of the Agreement and adjust the salary as
appropriate in light of Executives performance and data and recommendations
from a mutually agreeable compensation consultant regarding compensation of
similarly situated executives.  All
compensation and comparable payments to be paid to Executive under this
Agreement shall be less withholdings required by law.  b.             Performance
Bonus.  Digimarc will pay a
performance bonus to Executive within forty five days of the end of each
calendar quarter of up to 50% of Executives salary earned during the quarter,
based on the Boards assessment of Executives performance against mutually
agreed upon objectives, which shall be made in the Boards discretion without
regard to any of Digimarcs bonus policies which may apply to other employees.
Executive must be employed with Digimarc on the last day of any applicable
calendar quarter in order to receive a bonus for that quarter.  c.             Stock options.  Digimarc will grant additional stock options
to Executive consistent with general market practices for similarly situated
executives as determined by periodic market surveys and analyses performed by a
mutually agreeable compensation consultant. 
Such surveys will be conducted not less than once per year.  d.             Vacation.  Executive will be entitled to four weeks
vacation per year.  2 
   e.             Other
Benefits. Digimarc will provide Executive with the same health,
disability, retirement and death and other fringe benefits as are generally
provided to other executives of the Company. 
The amount and extent of benefits to which Executive is entitled shall
be governed by the specific benefit plan, as it may be amended from time to
time.  Digimarc reserves the ability, in
its sole discretion, to adjust Executives benefits provided under this
Agreement.  4.             TERMINATION.  a.             Executives
employment will terminate automatically upon Executives death.  b.             Digimarc may
terminate Executives employment at any time, upon thirty (30) days written
notice to Executive, if Executive becomes permanently disabled.  Digimarc will determine permanent disability
in good faith according to the same standards applicable to other executives of
Digimarc.  c.             Digimarc may
terminate Executives employment under this Agreement at any time (i)
immediately for cause (which will mean for any action or inaction of
Executive which is adverse to Digimarcs interests, including, without limitation,
Executives dishonesty, grossly negligent misconduct, willful misconduct,
disloyalty, act of bad faith, neglect of duty or material breach of this
Agreement or of any Digimarc policy applicable to its Executives generally), or
(ii) without cause upon thirty (30) days written notice to Executive.  d.             Executive may
terminate his employment under this Agreement due to adverse change in
conditions of employment at any time upon thirty (30) days prior written
notice to Digimarc.  Adverse change
shall include any of the following changes, if done without Executives prior
written consent:  reduction in title or
responsibilities, or mandatory relocation more than 35 miles from current place
of employment.  e.             Executive may
otherwise voluntarily terminate his employment at any time upon thirty (30)
days prior written notice to Digimarc.  5.             EFFECTS OF TERMINATION.  a.             If Executives
employment is automatically terminated by reason of Executives death or
permanent disability or Executive voluntarily terminates his employment (except
for a termination under Section 4(d) above), all Digimarc obligations under
this Agreement will end except for payment of any Compensation payable under
Section 3 for services performed prior to termination and reimbursement of properly
authorized business expenses.  b.             If Digimarc
terminates Executive for cause as defined in Section 4(c) above, all of
Digimarc obligations under this Agreement will end except for payment of any    3 
    Compensation payable under Section 3 for services performed prior to
termination and reimbursement of properly authorized business expenses.  c.             If Digimarc
terminates Executive without cause or Executive terminates his employment under
Section 4(d) above, all Digimarc obligations under this Agreement will end,
except that Executives stock options will immediately and fully vest and
Digimarc will continue to pay Salary and Bonus to Executive and provide
continued benefits (or if unavailable under the general terms and provisions of
the applicable plan, their equivalent) for Executive and his dependents, for
two years from the date of termination, provided, however, that Digimarc shall
have no obligation to make any such payments in the event Executive breaches
Sections 7 or 8 of this Agreement.  The
annualized compensation to be paid will be the sum of Executives Salary at the
date of termination plus any Bonus earned in the most recent fiscal year.  The compensation will be paid according to
Digimarcs standard payroll schedules from the date of termination, as if Davis
had not been terminated.  At the end of
the second year after such a termination, all of Digimarcs obligations under
this Agreement shall end.  6.             EXCISE TAXES  a.             In the event that any payment, benefit or distribution
or combination thereof (within the meaning of Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the Code)) to Executive or for
Executives benefit, paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise in connection with, or arising out
of, Executives employment with Digimarc (a Payment or Payments), would be
subject to the excise tax imposed by Code Section 4999, or any interest or
penalties are incurred by Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the Excise Tax), then Executive will be entitled
to receive an additional payment (a Gross-Up Payment) in an amount such that
after payment by Executive of all taxes (including any interest or penalties
(other than interest and penalties imposed by reason of Executives failure to
file timely a tax return or pay taxes shown due on Executives return) imposed
with respect to such taxes and the Excise Tax), including any Excise Tax
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. b.             An initial determination as to whether a Gross-Up
Payment is required pursuant to this Agreement and the amount of such Gross-Up
Payment shall be made by Digimarc. 
Digimarc shall provide its determination (the Determination), together
with detailed supporting calculations and documentation, to Executive within
fifteen (15) days of Executives termination date, if applicable, or such
other time as requested by Executive (provided Executive reasonably believes
that any of the Payments may be subject to the Excise Tax).  If requested by Executive, Digimarc shall
furnish Executive, at Digimarcs expense, with an opinion reasonably acceptable
to Executive from Digimarcs accounting firm (or an accounting firm of
equivalent stature reasonably acceptable to Executive) that there is a reasonable
basis for the Determination.  Any
Gross-Up Payment determined 4 
   pursuant to this
Section 6(b) shall be paid by Digimarc to Executive within five (5) days
of receipt of the Determination. c.             As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment
(or a portion thereof) will be paid which should not have been paid (an Excess
Payment) or a Gross-Up Payment (or a portion thereof) which should have been
paid will not have been paid (an Underpayment). 1.             An Underpayment shall be deemed to
have occurred (i) upon notice (formal or informal) to Executive from any
governmental taxing authority that Executives tax liability (whether in respect
of Executives current taxable year or in respect of any prior taxable year)
may be increased by reason of the imposition of the Excise Tax on a Payment or
Payments with respect to which Digimarc has failed to make a sufficient
Gross-Up Payment, (ii) upon a determination by a court, or (iii) by
reason of determination by Digimarc (which shall include the position taken by
Digimarc, together with its consolidated group, on its federal income tax
return).  If an Underpayment occurs,
Executive shall notify Digimarc in writing of any claim by any government
taxing authority that, if successful, would require the payment by Digimarc of
any Gross-Up Payment or additional Gross-Up Payment.  Such notification shall be given as soon as practicable but no
later than ten (10) business days after Executive is informed in writing of
such claim and shall apprise Digimarc of the nature of such claim and the date
on which such claim is requested to be paid. 
Executive shall not pay such claim prior to the expiration of the thirty
(30) day period following the date on which it gives such notice to Digimarc
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due).  If
Digimarc notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall (i) give Digimarc any
information reasonably requested by Digimarc relating to such claim, (ii) take
such action in connection with contesting such claim as Digimarc shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by Digimarc, (iii) cooperate with Digimarc in good faith in order to
effectively contest such claim and (iv) permit Digimarc to participate in any
proceedings relating to such claim; provided, however, that
Digimarc shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses (other than interest and penalties imposed by reason of Executives
failure to file timely a tax return or pay taxes shown due on Executives
return).  Without limitation on the
foregoing provisions of this Section 6, Digimarc shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as
Digimarc shall determine; provided,    5 
     further, that if Digimarc directs Executive to
pay such claim and sue for a refund, Digimarc shall advance the amount of such
payment to Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; provided, further, that if Executive is required to
extend the statute of limitations to enable Digimarc to contest such claim,
Executive may limit this extension solely to such contested amount.  Digimarcs control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the applicable governmental taxing authority.  2.             An
Excess Payment shall be deemed to have occurred upon a Final Determination (as
hereinafter defined) that the Excise Tax shall not be imposed upon a Payment or
Payments (or portion thereof) with respect to which Executive had previously
received a Gross-Up Payment.  A Final
Determination shall be deemed to have occurred when Executive has received
from the applicable government taxing authority a refund of taxes or other
reduction in Executives tax liability by reason of the Excess Payment and upon
either (i) the date a determination is made by, or an agreement is entered
into with, the applicable governmental taxing authority which finally and
conclusively binds Executive and such taxing authority, or in the event that a
claim is brought before a court of competent jurisdiction, the date upon which
a final determination has been made by such court and either all appeals have
been taken and finally resolved or the time for all appeals has expired or
(ii) the statute of limitations with respect to Executives applicable tax
return has expired.  If an Excess
Payment is determined to have been made, the amount of the Excess Payment shall
be treated as a loan by Digimarc to Executive, which loan Executive must repay
to Digimarc together with interest at the applicable federal rate under Code
Section 7872(f)(2); provided, that no loan shall be deemed to have
been made and no amount will be payable by Executive to Digimarc unless, and
only to the extent that, the deemed loan and payment would either reduce the
amount on which Executive is subject to tax under Code Section 4999 or
generate a refund of tax imposed under Code Section 4999. d.             Notwithstanding anything contained
in this Agreement to the contrary, in the event that, according to the
Determination, an Excise Tax will be imposed on any Payment or Payments,
Digimarc shall pay to the applicable government taxing authorities, as Excise
Tax withholding, the amount of the Excise Tax that Digimarc has actually
withheld from the Payment or Payments. 7.             TERMINATION OBLIGATIONS.  a.             Executive agrees
that all property, including, without limitation, all equipment, tangible
Proprietary Information (as defined below), documents, books, records, reports,
notes, contracts, lists, computer disks (and other computer-generated files and
data), and copies thereof, created on any medium and furnished to, obtained by,
or prepared by   6 
    Executive in the course of or incident to his employment, belongs to
Digimarc and shall be returned promptly to Digimarc upon termination of the
Term.  b.             All benefits to
which Executive is otherwise entitled shall cease upon Executives termination,
unless explicitly continued either under this Agreement or under any specific
written policy or benefit plan of Digimarc.  c.             Upon termination of
the Term, Executive shall be deemed to have resigned from all offices and
directorships then held with Digimarc or any Affiliate.  d.             The representations
and warranties contained in this Agreement and Executives obligations under
this Section 7 on Termination Obligations and Section 8 on Proprietary
Information shall survive the termination of the Term and the expiration of
this Agreement.  e.             Following any
termination of the Term, Executive shall fully cooperate with Digimarc in all
matters relating to the winding up of pending work on behalf of Digimarc and
the orderly transfer of work to other executives of Digimarc.  Executive shall also cooperate in the
defense of any action brought by any third party against Digimarc that relates
in any way to Executives acts or omissions while employed by Digimarc.  f.              Prior to beginning
any employment within two years (2) year following any termination of the Term,
Executive shall first provide Digimarc with the name and address of his
prospective employer so that Digimarc may provide the new employer with a copy
of this Agreement.   8.             PROPRIETARY INFORMATION AND
COVENANT NOT TO COMPETE.  a.             Defined.  Proprietary Information is all information
and any idea in whatever form, tangible or intangible, pertaining in any manner
to the business of Digimarc, or any Affiliate, or its employees, clients,
consultants, or business associates, which was produced by any employee of
Digimarc in the course of his or her employment or otherwise produced or
acquired by or on behalf of Digimarc. 
All Proprietary Information not generally known outside of Digimarcs
organization, and all Proprietary Information so known only through improper
means, shall be deemed Confidential Information.  Without limiting the foregoing definition, Proprietary and
Confidential Information shall include, but not be limited to:  (i) formulas, teaching and development
techniques, processes, trade secrets, computer programs, electronic codes,
inventions, improvements, and research projects;  (ii) information about costs, profits, markets, sales, and lists
of customers or clients;  (iii)
business, marketing, and strategic plans; and (iv) employee personnel files and
compensation information.  Executive
should consult any Digimarc procedures instituted to identify and protect
certain types of Confidential Information, which are considered by Digimarc to
be safeguards in addition to the protection provided   7 
    by this Agreement.  Nothing
contained in those procedures or in this Agreement is intended to limit the
effect of the other.  b.             General
Restrictions on Use.  During
the Term, Executive shall use Proprietary Information, and shall disclose
Confidential Information, only for the benefit of Digimarc and as is necessary
to carry out his responsibilities under this Agreement.  Following termination, Executive shall
neither, directly or indirectly, use any Proprietary Information nor disclose
any Confidential Information, except as expressly and specifically authorized
in writing by Digimarc.  The publication
of any Proprietary Information through literature or speeches must be approved
in advance in writing by Digimarc.  c.             Location and
Reproduction.  Executive shall
maintain at his work station and/or any other place under his control only such
Confidential Information as he has a current need to know.  Executive shall return to the appropriate
person or location or otherwise properly dispose of Confidential Information
once that need to know no longer exists. 
Executive shall not make copies of or otherwise reproduce Confidential
Information unless there is a legitimate business need for reproduction.  d.             Prior
Actions and Knowledge. 
Executive represents and warrants that from the time of his first
contact with Digimarc, he has held in strict confidence all Confidential
Information and has not disclosed any Confidential Information, directly or
indirectly, to anyone outside of Digimarc, or used, copied, published, or
summarized any Confidential Information, except to the extent otherwise
permitted in this Agreement.  e.             Third-Party
Information.  Executive
acknowledges that Digimarc has received and in the future will receive from
third parties their confidential information subject to a duty on Digimarcs
part to maintain the confidentiality of this information and to use it only for
certain limited purposes.  Executive
agrees that he owes Digimarc and these third parties, during the Term and
thereafter, a duty to hold all such confidential information in the strictest
confidence and not to disclose or use it, except as necessary to perform his
obligations hereunder and as is consistent with Digimarcs agreement with third
parties.  f.              No
Competition.  In the interest
of preventing the use or disclosure of Confidential Information in breach of
the preceding subsections and in consideration for Digimarc agreeing to make
the post-termination payments to Executive described in Section 5(c),  Executive shall not, during his term of
employment or for two (2) years following the termination of that employment,
for any reason, perform work for any of Digimarcs business competitors whether
as an employee or as a consultant, and shall not serve as a director, partner,
agent or shareholder of such competitor (except that Executive may hold less
than 5% of the outstanding stock of any public company for investment
purposes).  Additionally, Executive
agrees that for a period of two (2) years after termination of the Term, he shall
not, directly or indirectly, (i) divert or attempt to divert from Digimarc (or
any Affiliate) any business of any kind in which it is engaged; or (ii) employ
or recommend for employment any person employed by Digimarc (or any   8 
    Affiliate), unless Executive can prove that any action taken in
contravention of this subsection was done without the use in any way of
Confidential Information.  The parties
to this Agreement hereby acknowledge and agree that this Agreement is a
memorialization of Executives promotion and intended further promotion to
Chairman of the Board, and that the agreements contained in this Section 8 are
part of the consideration for such advancement in position.  g.             Interference
with Business.  In order to
avoid disruption of Digimarcs business, Executive agrees that for a period of
two (2) years after termination of the Term, he shall not, directly or
indirectly, (i) solicit any customer of Digimarc (or any Affiliate) known to
Executive during the Term to have been a customer; or (ii) solicit for
employment any person employed by Digimarc (or any Affiliate).  9.             NOTICES.  Any notice to be given hereunder by Digimarc to Executive will be
deemed to be given if delivered to Executive in person, or if mailed to
Executive, by certified mail, postage prepaid, return receipt requested, at his
address last shown on the records of Digimarc. 
Any notice to be given by Executive to Digimarc will be deemed to be
given if delivered in person or by mail, postage prepaid, return receipt
requested to the Chief Financial Officer at Digimarcs principal executive
office, unless Executive or Digimarc will have duly notified the other party in
writing of a change of address. If mailed, notice will be deemed to have been
given when deposited in the mail as set forth above.  10.          AMENDMENTS.  This Agreement will not be modified or discharged, in whole or in part,
except by an agreement in writing signed by an executive officer of Digimarc
other than Executive on the one hand, and Executive on the other hand.  11.          ENTIRE AGREEMENT.  This Agreement, together with any and all other written agreement(s)
made contemporaneously herewith and applicable options and benefits plans of
the company, constitute the entire agreement between the parties with respect
to Executives employment by Digimarc from and after the Effective Date. The
parties are not relying on any other representation or understanding with
respect thereto, express or implied, oral or written. This Agreement, as
supplemented by such contemporaneous agreement(s), supersedes any prior
employment agreement, written or oral, of Digimarc with respect to Executive.  12.          CAPTIONS.  The captions contained in this Agreement are for convenience of
reference only and do not affect the meaning of any terms or provisions hereof.   9 
     13.          BINDING EFFECT.  The rights and obligations of Digimarc hereunder will inure to the
benefit of, and will be binding upon, Digimarc and its respective successors
and assigns, and the rights and obligations of Executive hereunder will inure
to the benefit of, and will be binding upon, Executive and his heirs, personal
representatives and estate.  14.          SEVERABLE PROVISIONS.  If any provision of this Agreement, or its application to any person,
place, or circumstance, is held by an arbitrator or a court of competent
jurisdiction to be invalid, unenforceable, or void, such provision shall be
enforced to the greatest extent permitted by law, and the remainder of this
Agreement and such provision as applied to other persons, places, and
circumstances shall remain in full force and effect.  15.          GOVERNING LAW.  This Agreement will be interpreted, construed, and enforced in all
respects in accordance with the laws of the State of Oregon.  16.          INTERPRETATION.  This Agreement shall be construed as a whole, according to its fair
meaning, and not in favor of or against any party.  By way of example and not in limitation, this Agreement shall not
be construed in favor of the party receiving a benefit nor against the party
responsible for any particular language in this Agreement.  Captions are used for reference purposes
only and should be ignored in the interpretation of the Agreement.  17.          EMPLOYEE
ACKNOWLEDGEMENT.  Executive acknowledges that he has had the opportunity to consult legal
counsel in regard to this Agreement, that he has read and understands this
Agreement, that he is fully aware of its legal effect, and that he has entered
into it freely and voluntarily and based on his own judgment and not on any
representations or promises other than those contained in this Agreement.  [SIGNATURE PAGE FOLLOWS]   10 
    IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the Effective Date.   DIGIMARC CORPORATION
  
  EXECUTIVEBY:
  
  /s/ PHILIP MONEGO
  
  /s/ BRUCE DAVISPHILIP MONEGO
  
  BRUCE DAVISCHAIRMAN     11