The problem I see with watermarking, is when someone has their ebooks stolen without their knowledge.
Someone hacks your amazon account, B&N account or any other store account and downloads a copy of the book with your information in it. Since they used your user/pass you're the one fingered unless the IP used comes from some obscure place like china, but then, maybe you were using a proxy, prove otherwise.
There's numerous other ways too. Email that you sent a book to your kindle via gets hacked (that happens quite frequently and it's not always down to a mistake the owner of the email account made such as having malware on their device).
Of course I'm assuming the person involved is after much more than just your ebooks, it'd be rather unlikely for someone to do this just to get a few books to upload, but as a "bonus" for their efforts, I could see it occurring.
In all those cases, the time/cost to prove you didn't do it would be quite a burden. Likely involving turning over every device you own for investigation and that would only prove you didn't use those devices. Plus, who's going to do that investigation, since it's not really a police matter, but a court matter.
What is more realistic, is some people will be innocently fined and will just pay up and never buy digital products again.
All that said, I still favour watermarks over encrypted DRM because it's a step closer to no DRM. Only a step mind and in some ways it's a misstep.