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[Fab]

Is it possible to have a watermark applied to hotlinked images?

[Sami]

Yes it's possible , you need on the fly water-marking check the  Mods: Watermarking & image manipulation board for that
afaik there is one mod for 1.3.x maybe you can re-code it for 1.4.x

[Stramm]

Not recommended cause this needs a lot of resources for every image view. With only a handful of users surfing your site you can bog your server down.

With HD space that cheap atm why not just upgrade your hosting account?

[Joachim Müller]

To add to what Stram said: Coppermine doesn't support hotlinking anyway, so you'd have to modify your hotlinking mod. Imo it's ethically wrong (and might even be wrong in legal terms) to hotlink pics and make them appear as yours by branding them with a watermark. If the hotlinked pics are yours anyway, then you should be able to permanently watermark them or (as Stramm suggested) keep them on the webspace your coppermine-driven gallery resides on.