The DocumentAnnotationViewer api does not have what you need in order to to save encrypted pdfs or pdfs with passwords, this control assumes that pdf is not encrypted when exporting annotation data. As a result you will receive a "Password Incorrect" exception when attempting to save to an encrypted pdf file. However, with with a little help from the PdfDocument class you can password protect your pdf files. Use the code example below to encrypt your pdf files from the DocumentAnnotationViewer.
Example:
using (MemoryStream ms = new MemoryStream())
{
PdfEncoder pdfEncoder = new PdfEncoder() { SizeMode = PdfPageSizeMode.FitToPage };
documentAnnotationViewer1.Save(ms, pdfEncoder);
PdfDocument doc = new PdfDocument(ms);
PdfSaveOptions saveOptions = new PdfSaveOptions();
// Note: createSecureString is just a helper method used to create the SecureString object containing the password.
// it is not a part of the DotImage SDK
SecureString securepassword= createSecureString("password");
saveOptions.SetOneTimePasswords(securepassword);
doc.Save("out.pdf", saveOptions);
}