The current watermark option is very basic and applies only to screenshot images, not the actual download.
Here’s my thoughts/needs for Downloads watermark improvements:
Apply watermarks to files not just screenshot images
Enable/disable watermark per category
Enable/disable watermark per file
Embed watermark into PDF per category/file
Force watermark yes/no
Ability to generate a unique watermark per download, logged in AdminCP to aid future accountability/traceability, if required.
Choice of text/unique random string/image watermark formats
There is obviously no golden solution, but if you have say members only downloads (that are not available to guests), or you charge for membership subscriptions, a bad actor can download the file and distribute them. Same applies with actual paid files.