"...A group of major consumer electronics companies are partnering to create a new video copy-protection scheme based on digital "watermarkig" technology. Digimarc, Hitachi, Macrovision, NEC, Philips Electronics, Pioneer and Sony this week said they are forming the Video Watermarking Group to give film studios means to distribute content online without the fear of potential copyright pirates. Watermarking technology places a unique bit of digital code into a file that is theoretically difficult to remove without damaging the quality of the sound or image.

The move to create watermark technology for videos also comes as Hollywood is looking to beef up its copy-protection scheme for DVDs and other digital formats. Many technologists say watermarking is better suited to tracking content than it is to protecting against reproduction. Unlike encryption, which scrambles a file unless someone has a "key" to unlock the process, watermarking does not intrinsically prevent use of a file. Instead it requires any player--a DVD machine or MP3 player, for example--to have instructions built in that can read watermarks and accept only correctly marked files.

Hardware manufacturers have traditionally been skeptical of this kind of approach, because of the need to be able to play back CDs or DVDs that were created without watermarks included. Critics of the approach also say it is not difficult to strip out watermarks, making files appear as though they lack protection..."