3. Other Intangible Assets

Other intangible assets consists of costs associated with the application, acquisition and defense of the Company’s patents, contractual rights to patents and trade secrets associated with the Company’s technologies, customer lists and non-compete agreements obtained as a result of acquisitions. The Company’s patents and trade secrets are for document anti-counterfeiting and anti-scanning technologies and processes that form the basis of the Company’s document security business. Patent application costs are capitalized and amortized over the estimated useful life of the patent, which generally approximates its legal life. External legal costs incurred to defend the Company’s patents are capitalized to the extent of an evident increase in the value of the patents and an expected successful outcome. Patent defense costs are expensed at the point when it is determined that the outcome is expected to be unsuccessful. The Company capitalizes the cost of an appeal until it is determined that the appeal will be unsuccessful. The Company’s capitalized patent defense costs expenses are analyzed for impairment based on the expected eventual outcome of the legal action and recoverability of proceeds or added economic value of the patent in excess of the costs. Legal actions related to the same patent defense case are unified into one asset group for the purposes on the impairment analysis. Intangible asset amortization expense is classified as an operating expense. The Company believes that the decision to incur patent costs is discretionary as the associated products or services can be sold prior to or during the application process. The Company accounts for other intangible amortization as an operating expense, unless the underlying asset is directly associated with the production or delivery of a product. Costs incurred to renew or extend the term of recognized intangible assets, including patent annuities and fees, are expensed as incurred. To date, the amount of related amortization expense for other intangible assets directly attributable to revenue recognized is not material.

Other intangible assets are comprised of the following:

		March 31, 2012						December 31, 2011
	Useful Life	Gross Carrying Amount		Accumulated Amortizaton		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortizaton		Net Carrying Amount
Acquired intangibles	5 -10 years	$	2,405,300	$	1,060,787	$	1,344,513	$	2,405,300	$	999,761	$	1,405,539
Patent application costs	Varied (1)		843,145		220,472		622,673		843,145		205,472		637,673
		$	3,248,445	$	1,281,259	$	1,967,186	$	3,248,445	$	1,205,233	$	2,043,212

(1)- patent rights are amortized over their expected useful life which is generally the legal life of the patent. As of March 31, 2012, the weighted average remaining useful life of these assets in service was approximately 12 years.

Amortization expense for the three months ended March 31, 2012 amounted to $76,026 ($71,964 – 2011). Approximate expected amortization for each of the five succeeding fiscal years is as follows:

2013	$	290,000
2014	$	290,000
2015	$	205,000
2016	$	171,000
2017	$	158,000