Finite state machines (FSMs) are the backbone of sequential circuit design. In this paper, a new FSM watermarking scheme is proposed by making the authorship information a non-redundant property of the FSM. To overcome the vulnerability to state removal attack and minimize the design overhead, the watermark bits are seamlessly interwoven into the outputs of the existing and free transitions of state transition graph (STG). Unlike other transition-based STG watermarking, pseudo input variables have been reduced and made functionally indiscernible by the notion of reserved free literal. The assignment of reserved literals is exploited to minimize the overhead of watermarking and make the watermarked FSM fallible upon removal of any pseudo input variable. A direct and convenient detection scheme is also proposed to allow the watermark on the FSM to be publicly detectable. Experimental results on the watermarked circuits from the ISCAS'89 and IWLS'93 benchmark sets show lower or acceptably low overheads with higher tamper resilience and stronger authorship proof in comparison with related watermarking schemes for sequential functions.