Note that this depends on the doctrine of water rights. The situation described is common in the Western US, where seniority of claims has priority over location in the watershed. Elsewhere, upstream users may have the rights to water.
There's also been an increasing amount of explicit exception to seniority rules for the specific purpose of rainwater collection, though this may include limitations, notably that the water be used only on the property in which it was originally collected. That is: you cannot collect rainwater, then sell it to others.
There's also been an increasing amount of explicit exception to seniority rules for the specific purpose of rainwater collection, though this may include limitations, notably that the water be used only on the property in which it was originally collected. That is: you cannot collect rainwater, then sell it to others.