# First in Time, Not First Everywhere: United Drug v. Rectanus and Territorial Trademark Rights

> How the Supreme Court protected a good-faith Louisville druggist against a senior 'Rex' user from Massachusetts, establishing that common-law trademark rights are territorial, not national.

Topic: Trademarks  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/united-drug-v-rectanus-territorial-common-law-rights/


When a Boston pharmaceutical giant tried to drive a Louisville druggist off a mark he had used honestly for nearly thirty years, the Supreme Court refused. In *United Drug Co. v. Theodore Rectanus Co.*, 248 U.S. 90 (U.S. 1918), a unanimous Court speaking through Justice Mahlon Pitney held that a trademark is not a right in gross that radiates across the whole country the instant it is adopted. It is appurtenant to an existing business and the goodwill that business has actually earned in a given market. Because Theodore Rectanus had chosen and built up the "Rex" mark in Louisville in good faith, with no knowledge of the earlier Massachusetts use, the senior user could not enjoin him in the territory he had developed first. The decision, decided alongside its companion *Hanover Star Milling Co. v. Metcalf*, gave American law the "Tea Rose-Rectanus" doctrine that still governs clearance and geographic-rights disputes today.

## At a glance

- **Case:** *United Drug Co. v. Theodore Rectanus Co.*, 248 U.S. 90 (U.S. 1918).
- **Court:** Supreme Court of the United States; opinion by Justice Mahlon Pitney for a unanimous Court.
- **Posture:** On certiorari from the Sixth Circuit, which had ruled for the junior user; the Supreme Court affirmed.
- **Holding:** Common-law trademark rights are territorial and tied to the goodwill of an actual business. A senior user cannot enjoin a remote junior user who adopted the same mark in good faith, without notice, and built valuable local trade before the senior user entered that market.
- **Significance:** Established the good-faith remote junior user defense and the principle that trademark protection extends only as far as the trade and reputation it protects.

## Two honest users, two cities

The facts read like a parable of an expanding national economy. Around 1877, Ellen M. Regis, a druggist in Massachusetts, began using "Rex" for a medicinal preparation aimed at dyspepsia. The mark and the business eventually passed to United Drug Company, the large Boston-based concern behind the Rexall chain. Entirely independently, around 1883, Theodore Rectanus adopted "Rex" for a medicinal preparation he sold in Louisville, Kentucky. He had never heard of the Regis product, and the two sold in wholly separate parts of the country. For decades each cultivated local customers under the same name without any collision.

The collision came only when United Drug expanded into Louisville around 1912 and discovered Rectanus's successor selling "Rex" in the very city where it now wanted to do business. United Drug sued, asserting that its priority of adoption gave it superior rights everywhere. The lower courts sided with the Louisville user, and the Supreme Court agreed.

## Trademark rights as appurtenant, not absolute

Justice Pitney's opinion rests on a conception of trademarks that the Court has never abandoned. A trademark, he wrote, is not property in the word itself, divorced from use. "The owner of a trade-mark may not, like the proprietor of a patented invention, make a negative and merely prohibitive use of it as a monopoly." The right exists only as appurtenant to an established business or trade, and the function of the mark is to identify the goods and protect the goodwill the owner has built. It follows that "the adoption of a trade-mark does not, at least in the absence of some valid legislation enacted for the purpose, project the right of protection in advance of the extension of the trade."

Because Regis and her successors had never traded in or near Louisville, they had no goodwill there for the mark to protect. Rectanus, by contrast, had honestly created exactly that goodwill in the same territory. To let the senior user expand into Louisville and dispossess the man who had spent years building the local reputation would, the Court said, work an injustice and reward the latecomer at the expense of the good-faith builder.

## Good faith and the limits of priority

The doctrine has teeth precisely because it turns on the junior user's state of mind and geography, not on a race to be first in the abstract. The defense protects only a junior user who adopted the mark in good faith and without notice of the prior use, and only in the distinct market it actually developed before the senior user arrived. A junior user who copied a known mark, or who later tried to follow the senior user into the senior user's own markets, would get no shelter.

The Court framed United Drug's position as a kind of estoppel: having stood by while Rectanus built his Louisville trade, the senior user could not, on later entering that field, treat the established local use as an infringement. Priority of appropriation matters, but only within the zone of actual or natural trade expansion. Outside that zone, a remote and innocent second comer can acquire enforceable rights of its own. This is the geographic heart of trademark law that students still learn as the Tea Rose-Rectanus rule.

## How federal registration changed the picture

*Rectanus* describes common-law rights, and it expressly reserved the effect of "valid legislation enacted for the purpose." The Lanham Act of 1946 supplied that legislation. A federal registration now operates as nationwide constructive notice of the registrant's claim, which means a party who adopts a confusingly similar mark after the registration generally cannot claim the good faith the defense requires. For applications filed after the 1988 revisions, registration can also confer nationwide constructive use as of the filing date.

The practical result is that the remote good-faith defense mostly protects use that began before the senior party's federal registration. A pre-existing good-faith user can typically continue in its established territory, frozen to that area, even against a later federal registrant. But the open frontier *Rectanus* assumed, in which two innocent users could each expand toward the other, has largely been closed by the registration system. That is why modern clearance searches look hard at both federal registrations and unregistered common-law uses.

## Open questions

- **How wide is the protected territory?** *Rectanus* protects the zone of actual trade and reputation, but courts still struggle to fix the precise boundaries, including any "zone of natural expansion," especially for businesses that advertise or sell online.
- **What counts as good faith today?** With national databases and easy searching, courts increasingly ask whether a junior user who failed to search can really claim innocence.
- **How do common-law and registered rights coexist?** The interface between a frozen common-law user and a later nationwide registrant continues to generate concurrent-use disputes before the Trademark Trial and Appeal Board and the courts.

## Implications

- **Priority is local, not national, at common law.** Being first to use a mark somewhere does not, by itself, lock up the mark everywhere; rights follow the goodwill.
- **Register early to claim the country.** Federal registration's constructive notice is the main way to convert a local mark into nationwide protection and to cut off later good-faith adopters.
- **Search before you launch.** A good-faith adopter who skips a clearance search risks losing the innocence that the remote-user defense requires.
- **A pre-existing local user can survive a later registrant.** Businesses that used a mark in good faith before someone else registered it can often keep operating in their established area.
- **Geography still decides hard cases.** In disputes between unregistered users, the question is usually who built real trade where, not who thought of the name first.

## Frequently asked questions

**Does United Drug v. Rectanus mean the first user of a mark always wins?**
No. The case holds the opposite. Common-law trademark rights are territorial and tied to the goodwill of an actual business. A senior user cannot enjoin a remote junior user who adopted the same mark in good faith, without notice, and built up trade in a separate market before the senior user arrived there.

**Does the Rectanus defense still work after federal registration?**
Only in narrow circumstances. The Lanham Act gives a federal registration nationwide constructive notice, so a junior user who adopts a mark after the senior party registers it generally cannot claim good faith. The remote good-faith defense mainly protects use that began before the senior user's federal registration.

**What is the 'Tea Rose-Rectanus' doctrine?**
It is the common-law rule, drawn from this case and *Hanover Star Milling Co. v. Metcalf*, that a good-faith junior user can keep using a mark in the distinct geographic area it developed before the senior user entered, because trademark rights extend only as far as the trade and reputation they protect.

## Authorities and sources

- Supreme Court opinion, Justia: https://supreme.justia.com/cases/federal/us/248/90/
- FindLaw case report (248 U.S. 90): https://caselaw.findlaw.com/court/us-supreme-court/248/90.html
- CourtListener opinion page: https://www.courtlistener.com/opinion/99231/united-drug-co-v-theodore-rectanus-co/
- Companion case, *Hanover Star Milling Co. v. Metcalf*, 240 U.S. 403 (1916), Justia: https://supreme.justia.com/cases/federal/us/240/403/