sed -n -e 's/^.*Word1 word2/\1/p' file1.txt
is not well defined, as the right hand side of the substitute command includes a backreference, but there is no capturing group on the left hand side. GNU sed 4.7 in linux gives an error message "invalid reference \1 on `s' command's RHS".
Since the requirement is to print the text after the first occurrence of "Word1 word2" we can't just use
.*Word1 word2 as the
.* is greedy.
Instead we will use a trick and convert the first
Word1 word2 into a single character and then delete up to that character. Any unused character will do, but a good choice is a newline as sed removes the newline as it reads each line and adds one when the line is printed. So we have
sed -n -e 's/Word1 word2/\n/;s/^.*\n//p' file1.txt > newfile.txt
If the "Word1 word2" was wanted then use
sed -n -e 's/Word1 word2/\n&/;s/^.*\n//p' file1.txt > newfile.txt