Corona hard seltzer sinks AB InBev unit in ‘beer’ definition dispute

Court rejects Modelo's arguments of trademark infringement and licencing breach after licensee brews ‘Corona’ and ‘Modelo’ hard seltzer | Ruling affirms earlier judgment concerning that drink does not qualify as ‘beer’ under terms of the agreement.

A US Appeals Court has ruled against Corona and Modelo beer in their dispute with a US distributor, over the sale of hard seltzers that used the same brand names.

The US Court of Appeals for the Second Circuit affirmed a District Court decision, ruling that Corona and Modelo hard seltzers created by Constellation, which had a licence to produce and sell the famous beer brands in the US, do not infringe the rights of the beers’ owner, Modelo.

Modelo, an Anheuser-Busch InBev unit, had entered into a licence agreement with Constellation in 2013, granting Constellation the right to use the ‘Corona’ and ‘Modelo’ marks for beer.

The agreement defined ‘beer’ broadly to include various alcoholic beverages, including beer, ale, porter, stout, malt beverages, and any other versions or combinations of those, as well as non-alcoholic versions.

However, the dispute began in 2021 when Constellation introduced Corona Hard Seltzer and Modelo Ranch Water, which Modelo contended violated the licensing agreement and infringed Modelo’s trademarks.

The dispute centred on whether Corona Hard Seltzer and Modelo Ranch Water qualified as beer under the terms of the licence.

Modelo argued that the carbonated beverages, where the alcohol content comes from a base of fermented sugar, fell outside the scope of the agreement's definition and therefore infringed.

However, Constellation maintained that the agreement encompassed a broader range of beverages, including those without traditional beer ingredients.

Ambiguous beer definition

The US District Court for the Southern District of New York denied Modelo's motion for summary judgment in 2023, ruling that the agreement's definition of ‘beer’ was ambiguous and therefore warranted a jury trial.

Following a trial, the jury ruled in favour of Constellation, concluding that Modelo had not demonstrated that Corona Hard Seltzer was outside the scope of the sublicence.

Modelo appealed the District Court's denial of summary judgment, contesting the ambiguity of the contractual language, as well as challenging the jury instructions and the exclusion of certain trial evidence.

However, the three-judge Second Circuit rejected Modelo's arguments, affirming the District Court's judgment.

The appellate court determined that the contractual language regarding the definition of ‘beer’ was ambiguous, as it extended to include “versions" of beer and malt beverages.

The Second Circuit also found no fault with the jury instructions, emphasising that the instructions adequately guided the jury in interpreting the contract's ambiguous terms.

Additionally, the court upheld the District Court's decision to exclude certain trial evidence, deeming it irrelevant and potentially confusing to the jury.

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