See interview with forensic analyst Grant Fredericks. Applied to both AVI and watermarking, money quote:
"Watermarking means nothing," said Fredericks. "Manufacturers who claim their stuff is admissible [because of watermarking] are not being honest. Using forensic tools we can extract the native files without ever having to go through watermarking or the encryption process. Watermarking really doesn't mean a thing to us."
Defense attorneys can and often object to the authenticity of manufacturer watermarking, even if it is digital. Video forensic experts typically analyze the details of the video as well as examining visible signs that would indicate tampering. Ultimately, this is the strongest way to validate the authenticity of the video, not a manufacturer watermark.
IANAL, but I've spoken to a few about this.
There seem to be a lot of myths about video evidence.
Practically any video can be admitted as evidence. This doesn't mean it will get you much, but it's admissable. It doesn't need to be 30fps, or watermarked, or a certain resolution, or in color, or anything.
Almost anything admitted by one side is going to be challenged by the other side. There can be a lot of "interpretation" about this, depending on the overall circumstances.
The neccessity for the video evidence to meet any criteria seems to often be related to how key/unique that video is to the overall position of one side or the other. If all you have is a video clip, you're probably going to want it to be a clean hi-res shot. If you have 30 pieces of evidence and the video just reinforces some key points or a general timeline, it's less important that it's of high caliber.
What stops someone from taking the video, editing it, then running it back through say an AXIS encoder, even using the technology mentioned above, and picking up a new watermark?