I've read that watermarking should in theory be impossible to detect except by the entity that watermarked it. Which is sensible, and I mostly understand at a high level.

But what I don't know and don't understand is what happens if you watermark watermarked text. Does it test positive for both watermarks? Only the second? Indeterminate?

Or maybe I'm misunderstanding. Can you tell that it's watermarked, but only the entity who put the watermark in place can test if it's theirs? My confusion about watermarking multiple times still stands, though.

Regardless of what happens when you watermark multiple times, no matter the outcome, it weakens the watermark. Which, depending on the threat model, kind of makes it moot. I can't imagine a serious situation where a watermark can be weakened in any way and still be useful. Even "this came from an LLM" isn't a valid signal if you can just watermark ANY text through purely mechanical means.

It's also not clear to me how this will affect mainstream LLMs. If all output text is watermarked, there MUST be an escape hatch. Otherwise, JSON schemas will break (or provide holes where unwatermarked text can be exfiltrated through MCP), "return this text exactly with no changes" will be impossible, and writing diffs will break.

I feel like I must be missing something.