An image processing technique is described in the context of a hierarchical image storage and retrieval system. The method allows for the controlled addition and removal of digital watermarks from selected image components in the hierarchy. The method adds a digital watermark in a selected image resolution component and the means to remove it in an additional image component termed the watermark removal component. The method employs the encryption of the watermark removal component, and decryption with a special key, or password during authorized retrieval. This technique allows users of a distributed system the convenience of providing the entire image hierarchy on a single storage medium permitting images containing watermarks to be accessed without restriction for browsing and proofing, while the watermark removal requires knowledge and us of a controlled code.