# Stone Creek v. Omnia: Knowledge Defeats Good Faith in the Tea Rose-Rectanus Defense

> The Ninth Circuit held that a junior user who knows of a senior user's mark cannot claim the remote good-faith defense, deepening a circuit split.

Topic: Trademarks  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/stone-creek-v-omnia-tea-rose-good-faith/


*Stone Creek, Inc. v. Omnia Italian Design, Inc.*, 875 F.3d 426 (9th Cir. 2017), is the Ninth Circuit's definitive answer to a question that had split the circuits for decades: what does "good faith" mean in the Tea Rose-Rectanus remote-user doctrine? Writing for the panel in an opinion filed July 11, 2017 and amended on August 30, 2017 (the original is reported at 862 F.3d 1131, the amended opinion at 875 F.3d 426), Judge M. Margaret McKeown held that a junior user's knowledge of the senior user's prior use of a mark defeats good faith, full stop. No separate showing of predatory intent is required. The court reversed a bench-trial judgment for the defendant, held the STONE CREEK mark infringed as a matter of law on the confusion question, and stripped the infringer of the one common-law defense that might have saved it.

For clearance practice the case is close to a parable. The Tea Rose-Rectanus doctrine exists to protect the innocent: the merchant who independently adopts a mark in a market where nobody has heard of the senior user. A trademark search is how a business proves, and preserves, that innocence. *Stone Creek* confirms that in the Ninth Circuit, as in the Seventh and Eighth, a junior user who adopts with its eyes open cannot later claim the remote-user shelter, no matter how geographically distant its market.

## At a glance

- **Case:** *Stone Creek, Inc. v. Omnia Italian Design, Inc.*, 875 F.3d 426 (9th Cir. 2017)
- **Decided:** Opinion by Judge McKeown (with Judge Callahan and District Judge Quist, sitting by designation) filed July 11, 2017 and amended August 30, 2017; affirming in part and reversing in part the District of Arizona after a bench trial; certiorari denied May 14, 2018
- **Holding:** Omnia's use of an identical mark on identical goods was likely to cause confusion, and Omnia could not invoke the Tea Rose-Rectanus defense because its knowledge of Stone Creek's prior use defeated any claim of good faith
- **Status:** Final; the separate holding that willfulness is required for disgorgement of profits was abrogated by *Romag Fasteners, Inc. v. Fossil, Inc.* (2020), but the good-faith holding remains governing Ninth Circuit law as of July 2026

## A supplier borrows its customer's brand

Stone Creek is a Phoenix-based furniture retailer that adopted its STONE CREEK mark, a red oval circling the words, around 1990, obtained Arizona state registration in 1992, and federally registered the mark in 2012. In 2003 it met Omnia Italian Design, a California leather-furniture manufacturer, at a trade show, and the two companies struck a deal: Omnia would manufacture leather furniture branded with the STONE CREEK mark for sale in Stone Creek's showrooms.

The relationship soured in a peculiarly modern way. In 2008, Omnia landed the Bon-Ton Stores as a major customer for its leather furniture. Bon-Ton did not want to sell under the Omnia name; it wanted a label that sounded "American." Omnia offered options, and Bon-Ton chose STONE CREEK, in part, as the Ninth Circuit recounted, because marketing materials and a logo already existed. Omnia's team digitally recreated Stone Creek's exact logo from old documents and applied it to binders, leather samples, color boards, and warranty cards. From 2008 to 2013 Omnia sold STONE CREEK-branded leather furniture to Bon-Ton galleries across the Midwest, reaching buyers in Illinois, Michigan, Ohio, Pennsylvania, and Wisconsin. Stone Creek learned of it in 2013, when confused customers began calling about Midwest store locations that did not exist and a warranty card from a Chicago-area sofa led a purchaser to Stone Creek's website. Omnia's vice president of sales candidly admitted the practice in an email, lamenting that inquiries were reaching Stone Creek "due to the similar name."

Stone Creek sued in the District of Arizona for federal and common-law infringement. After a bench trial, the district court found no likelihood of confusion and entered judgment for Omnia. The Ninth Circuit reversed.

## Identical marks, identical goods, and the Sleekcraft factors

On confusion, the panel treated the case as nearly self-proving. Under *AMF Inc. v. Sleekcraft Boats*, 599 F.2d 341 (9th Cir. 1979), similarity of the marks and proximity of the goods are the two most probative factors, and here both were absolute: Omnia used an exact replica of Stone Creek's logo on the same goods, leather furniture that Omnia itself manufactured for both. Quoting *Brookfield Communications, Inc. v. West Coast Entertainment Corp.*, 174 F.3d 1036 (9th Cir. 1999), the court observed that with virtually identical marks on identical products, likelihood of confusion "would follow as a matter of course."

The district court had gone the other way largely because of geography: Stone Creek's showrooms were in Phoenix, Bon-Ton's galleries in the Midwest. The panel called that a myopic focus. Stone Creek had marketed on its website since 2000, advertised in a nationwide magazine with Midwest readership, and made sales in the region during the infringement period; $610,384 of its more than $200 million in sales since inception had occurred in the Midwest. The court also invoked the intent presumption: choosing a designation with knowledge that it is another's trademark permits an inference of intent to deceive, and the district court had expressly found that Omnia adopted the mark "with full knowledge of Stone Creek's senior use." Omnia's explanation that it merely wanted an American-sounding name did not help; the panel compared it to a marketer appropriating Haagen-Dazs because a foreign-sounding name would appeal to customers.

## The Tea Rose-Rectanus doctrine and the Swiss-cheese map

Infringement did not end the case, because Omnia claimed the common-law remote-user defense. The Tea Rose-Rectanus doctrine takes its name from *Hanover Star Milling Co. v. Metcalf*, 240 U.S. 403 (1916), and *United Drug Co. v. Theodore Rectanus Co.*, 248 U.S. 90 (1918): common-law rights extend only to territory where the mark is known and recognized, so a later user may acquire rights in pockets geographically remote from the first user's market. Federal registration does not erase enclaves that predate it; as the panel put it, the geographic scope of a registered senior user's rights "looks like Swiss cheese," stretching nationwide with holes cut out where others acquired common-law rights first. Because Omnia began its Midwest use in 2008, four years before Stone Creek's 2012 federal registration, the defense was at least available in principle, and the Lanham Act preserves it through 15 U.S.C. § 1115(b)(5).

Everything therefore turned on good faith, and on a genuine circuit split. The Seventh and Eighth Circuits and the TTAB hold that the junior user's knowledge of the senior user's prior use destroys good faith. The Fifth and Tenth Circuits ask instead whether the junior user acted with a "design inimical" to the senior user's interests, such as intent to trade on its goodwill, treating knowledge as merely a factor.

## Knowledge defeats good faith

The Ninth Circuit sided with the knowledge camp. Judge McKeown grounded the choice in the doctrine's own sources: *Tea Rose* described a junior user who adopted "without knowledge or notice" that the name was in use by anybody else, and *Rectanus* protected an "innocent" junior user where "neither side [had] any knowledge or notice of what was being done by the other." The stray "design inimical" line in *Tea Rose* on which the Fifth and Tenth Circuits rely appears nowhere else in the opinion. Justice Brennan's separate opinion in *K mart Corp. v. Cartier, Inc.*, 486 U.S. 281, 314 n.8 (1988) (concurring in part and dissenting in part), likewise tied the doctrine to unawareness.

Policy pointed the same way. The doctrine protects a junior user who unwittingly adopts the same mark and invests in building an independent business; a user like Omnia, with affirmative knowledge, "knows that its actions come directly at the expense of the senior user." And the statute confirms it: the § 1115(b)(5) limited-area defense applies only to a mark adopted "without knowledge of the registrant's prior use," and the Lanham Act's constructive-notice provisions, 15 U.S.C. §§ 1057(b) and 1072, defeat good faith by mere constructive knowledge. If constructive notice suffices, actual notice must. Because Omnia adopted STONE CREEK knowing exactly whose mark it was, the district court's finding that Omnia "was a non-innocent remote user" ended the defense, and Omnia was liable for infringement.

## The willfulness holding and its fate after Romag

The panel then addressed remedies. Following *Lindy Pen Co. v. Bic Pen Corp.*, 982 F.2d 1400 (9th Cir. 1993), it held that Congress's 1999 amendment to 15 U.S.C. § 1117(a), which added the phrase "willful violation under section 1125(c)" to cover dilution claims, did not displace Ninth Circuit precedent requiring willfulness before a defendant's profits may be disgorged, and it remanded for a determination of whether Omnia acted willfully. That holding did not age well. In *Romag Fasteners, Inc. v. Fossil, Inc.*, 590 U.S. 212 (2020), the Supreme Court held that willfulness is not an inflexible precondition to a profits award under § 1117(a), abrogating *Stone Creek* on the point, though the Court stressed that a defendant's mental state remains a highly important consideration.

The endgame favored Omnia anyway. On remand the district court declined to award Stone Creek any of Omnia's roughly $4.5 million in profits, and in an unpublished April 20, 2020 memorandum the Ninth Circuit affirmed that denial, reasoning that the profits were not attributable to the infringement given Stone Creek's minimal Midwest brand awareness. Judge Lucero, sitting by designation from the Tenth Circuit, dissented from that portion of the disposition. Stone Creek petitioned for certiorari a second time, and the Court denied review on January 25, 2021 (No. 20-706). The liability holdings, both on confusion and on good faith, stand untouched.

## Open questions

The Supreme Court denied certiorari in May 2018, so the circuit split on good faith persists: identical facts still produce different outcomes in Dallas or Denver than in Phoenix, Chicago, or St. Louis, and a multi-region junior user cannot know which standard will govern until it knows where it will be sued. *Stone Creek* also left the boundaries of "knowledge" unexplored. Omnia had actual, intimate knowledge as Stone Creek's own manufacturer, an easy case; the opinion does not say how much less will do, whether a long-forgotten search report, a rumor of a distant user, or awareness of a user believed to be abandoned defeats good faith. And after *Romag* eliminated the willfulness precondition while the 2020 remand decision still denied profits for lack of attribution, the practical standard for disgorgement in the Ninth Circuit, and the weight of mental state within it, remains unsettled.

## Implications for brands and businesses

- **A clearance search is what good faith looks like in evidence.** The remote-user defense now turns on what the adopter knew. A documented search that found nothing is the best proof of innocence; adopting a name a search did reveal, or skipping the search after exposure to the mark, forfeits the defense in the Ninth, Seventh, and Eighth Circuits.
- **Never let a supplier, licensee, or distributor near your mark without a contract.** Omnia was Stone Creek's own manufacturer. Supply and private-label agreements should expressly own the mark, forbid any use outside the channel, and require destruction of logo files at termination.
- **Geographic distance is not a safety zone.** Identical marks on identical goods will be found confusing even across half a continent, especially where the senior user has a website, national advertising, and any sales in the region. Do not clear a mark on the theory that the prior user is "somewhere else."
- **Register federally before someone fills the map.** Stone Creek waited twenty years to federalize its 1990 mark, and Omnia's 2008 adoption predated the 2012 registration, which is the only reason the remote-user defense was even on the table. Early registration, through constructive notice under § 1072, closes that door.

## Frequently asked questions

**What is the Tea Rose-Rectanus doctrine?** It is the common-law rule, drawn from Hanover Star Milling v. Metcalf (1916) and United Drug v. Rectanus (1918), that trademark rights extend only where a mark is actually used and known. A junior user who adopts the same mark in good faith in a geographically remote market can acquire its own rights there. Stone Creek holds that in the Ninth Circuit, good faith requires that the junior user had no knowledge of the senior user's prior use.

**Is Stone Creek's willfulness holding still good law?** No. The panel held that willfulness remained a prerequisite to disgorgement of a defendant's profits under 15 U.S.C. § 1117(a), but the Supreme Court abrogated that rule in Romag Fasteners v. Fossil (2020), holding willfulness is not an inflexible precondition. A defendant's mental state remains a highly important consideration in whether profits are awarded. The knowledge-defeats-good-faith holding is unaffected and remains circuit law.

**Which courts follow the other side of the good-faith split?** The Fifth and Tenth Circuits ask a narrower question: whether the junior user acted with a design inimical to the senior user's interests, such as intent to trade on its goodwill, so mere knowledge is only a factor. The Seventh and Eighth Circuits, the TTAB, and now the Ninth Circuit hold that knowledge of the senior user's prior use by itself destroys good faith. The Supreme Court denied certiorari in 2018, leaving the split in place as of July 2026.

## Authorities and sources

- [*Stone Creek, Inc. v. Omnia Italian Design, Inc.*, No. 15-17418 (9th Cir. July 11, 2017) (slip opinion)](https://cdn.ca9.uscourts.gov/datastore/opinions/2017/07/11/15-17418.pdf)
- [*Stone Creek, Inc. v. Omnia Italian Design, Inc.*, No. 15-17418 (9th Cir. Aug. 30, 2017) (order and amended opinion, reported at 875 F.3d 426)](https://cdn.ca9.uscourts.gov/datastore/opinions/2017/08/30/15-17418.pdf)
- [*Stone Creek, Inc. v. Omnia Italian Design, Inc.* (9th Cir. Apr. 20, 2020) (post-remand memorandum) (FindLaw)](https://caselaw.findlaw.com/court/us-9th-circuit/2060424.html)
- [*Romag Fasteners, Inc. v. Fossil, Inc.*, 590 U.S. 212 (2020) (Cornell LII)](https://www.law.cornell.edu/supct/cert/18-1233)
- [*United Drug Co. v. Theodore Rectanus Co.*, 248 U.S. 90 (1918) (Cornell LII)](https://www.law.cornell.edu/supremecourt/text/248/90)
- [*Hanover Star Milling Co. v. Metcalf*, 240 U.S. 403 (1916) (Cornell LII)](https://www.law.cornell.edu/supremecourt/text/240/403)
- [Lanham Act §§ 7(b), 22, 33(b)(5), 35(a), 15 U.S.C. §§ 1057, 1072, 1115, 1117 (Cornell LII)](https://www.law.cornell.edu/uscode/text/15/1115)
- [McCormick Barstow LLP, "I Know Nothing! In the Ninth Circuit, Only Good Faith Users... May Hang Onto Their Brand"](https://www.mccormickbarstow.com/i-know-nothing-in-the-ninth-circuit-only-good-faith-users-of-a-registered-trademark-who-have-no-knowledge-of-the-senior-users-prior-use-may-hang-onto-their-brand/)