Item 1. Legal Proceedings
Item 1. Legal Proceedings.
On May 8, 2025, a class action lawsuit captioned Ullom v. Digimarc Corp., et al. , No. 3:25-cv-00779-JR (the " Ullom Action") was filed against the Company in the United States District Court for the District of Oregon. An amended complaint was filed on November 26, 2025. The amended complaint purports to assert claims against the Company and its now former Chief Executive Officer and current Chief Financial Officer pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder, on behalf of a putative class of investors who purchased or otherwise acquired the Company’s shares between August 14, 2024 and February 26, 2025 (the "class period"). The Ullom Action seeks to recover damages allegedly caused by purported misstatements and omissions regarding the renewal status of a commercial contract, claiming that these alleged misstatements and omissions artificially inflated the price paid for our common stock during the class period.
Subsequently, five derivative lawsuits were filed nominally on the Company’s behalf, including three in the United States District Court for the District of Oregon: (i) Franchi v. McCormack et al. , No. 3:25-cv-01543-AN, filed August 29, 2025 (as amended September 2, 2025) (the " Franchi Action"); (ii) Chadwick v. McCormack et al. , No. 3:25-cv-01838-JR, filed October 7, 2025 (the "C hadwick action"); and (iii) Jensen v. McCormack et al. , No. 3:25-cv-01891-SB, filed October 14, 2025 (the " Jensen action"); and two in the Circuit Court of the State of Oregon for the County of Multnomah: (i) Johnson v. McCormack et al. , No. 25-cv-56998, filed October 23, 2025 (the " Johnson action"); and (ii) Sperry v. McCormack et al. , No. 26-cv-00621 , filed January 6, 2026. These derivative actions are based on the same alleged facts and circumstances as the Ullom Action and are against the Company’s now former Chief Executive Officer and current Chief Financial Officer and directors. The derivative actions collectively assert claims pursuant to Sections 10(b), 14(a), and 20(a) of the Exchange Act, as well as for breaches of fiduciary duties, aiding and abetting breaches of fiduciary duties, unjust enrichment, and waste of corporate assets. Each of the five derivative lawsuits seeks to recover damages on the Company’s behalf and alleges that a legally required pre-suit demand on the Board of Directors would be futile and should be excused.
On November 4, 2025, the Chadwick, Jensen and Franchi Actions were consolidated and stayed pending resolution of the Company’s anticipated motion to dismiss in the Ullom Action. On January 5, 2026, the Johnson Action was stayed pending the same event. On February 9, 2026, the Company and its now former Chief Executive Officer and current Chief Financial Officer moved to dismiss the Ullom Action. On February 11, 2026, the Johnson and the Sperry Actions were consolidated and remain stayed pending resolution of the defendants' motion to dismiss in the Ullom Action.
On June 23, 2026, the magistrate judge issued findings and a recommendation that the motion to dismiss filed by Digimarc Corporation, the Company's predecessor registrant ("predecessor registrant") and now known as DMRC LLC, and its now former Chief Executive Officer and current Chief Financial Officer in the Ulom Action be granted and that judgment be entered dismissing the Ullom Action. The findings and recommendation are subject to review by the district judge and do not constitute a final order or judgment. The consolidated federal derivative actions, which were filed nominally on behalf of the predecessor registrant, remain stayed pending resolution of the Ullom Action. In addition, the derivative lawsuits filed in the Circuit Court of the State of Oregon for the County of Multnomah, the Johnson and the Sperry Actions, which were also filed nominally on behalf of the predecessor registrant, remain consolidated and stayed. The defendants, including the Company, believe they have defenses to the claims and are responding accordingly.
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