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Watermarking and encryption are complementary tools for information security. We propose a combined encryption and reversible watermarking scheme which has the advantages of both encryption and watermarking for medical images. The method uses Sachnev et.al's prediction and sorting scheme for watermark embedding which is the best in watermarking literature with a modification to improve the embedding capacity slightly. The encryption is done using RC4algorithm which is a stream cipher capable of processing variable sized blocks. Watermarking will protect the ownership identity and everything it is supposed to but encryption will be highly desirable in the case of medical images to ensure authenticity of the same.

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