D:\sbornik\...\transactions.DVI Mathematical Problems of Computer Science 31, 28{39, 2008. Lower B ound for E Capacity of Discr ete M emor yless Channel with T wo-Sided State I nfor mation Ma r ia m E . H a r o u t u n ia n a n d A r t h u r R . Mu r a d ya n Institute for Informatics and Automation Problems of NAS of RA. E-mail: armar@ipia.sci.am Abstract We study the channel with two-sided state information, a discrete memoryless chan- nel with ¯nite input and output alphabets and random state sequence. Partial informa- tion about the state sequence is available to the encoder and decoder. Applications of this study include watermarking, data hiding, communication in presence of partially known interferers. The capacity of this model was obtained by Cover and Chiang in [1]. 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