When I set a password on a PDF (mainly to prevent someone from grabbing the photos out of it), it has the side effect of not allowing someone to place the pdf in an InDesign file. This is a big problem, as we're always sending ad files to publishers, and they need to be able to place the PDF...but at the same time we need to protect our copywrited material.
And yes, I know giving them the password will let them place the pdf. But it will also let them extract the images, which is what we're trying to prevent.
How do I do this?
The problem is the type of security you're talking about isn't very strong at all. Any restrictions you apply can quickly be removed by readily available software. So if someone is moderately determined to steal your images, they can rather easily. The security is only an illusion and protecting your rights would be better handled by a simple legally binding agreement between you and your publisher.