Waterleaf Seeds can be found in the ocean biome when harvesting Waterleaf plants, but only when the conditions are right. Only a blooming Waterleaf plant will yield seeds when harvested. Waterleaf will only bloom when submerged in water, which isn't very common in the desert, so it usually has to be submerged by the player.
The easiest way to do this when attempting to procure your initial seeds out in the Desert is to place blocks two high on either side of the plant and then pour a Water Bucket into the gap, thus submerging the Waterleaf in water. Now, when you harvest the Waterleaf, it will also drop Waterleaf Seeds.
Waterleaf Seeds can be placed in empty Clay Pots, or in Sand, and grown into additional Waterleaf plants which can be harvested. Potted Waterleaf will grow anywhere, not just in the Desert biome, but will only yield seeds if you submerge the plant, Clay Pot and all, in water.
The Waterleaf plant seems to yield more seeds (2-3) if harvested at night instead of during the day (1-2).
The plant emits faint blue sparkles when ready to harvest.