Modelo argues at Second Circuit that Constellation hard seltzer violates trademark agreement

MANHATTAN (CN) — Modelo asked a Second Circuit panel Thursday in Manhattan to revive its claims that Constellation Brands overstepped its contract with the Mexican beer company when it marketed hard seltzers as Modelo and Corona products.

Constellation Brands — which produces beer, wine and spirits, including a beverage sold as Corona Hard Seltzer — entered into a trademark licensing agreement with Modelo in 2013 in which the beer company granted Constellation the ability to use Modelo and Corona trademarks on beer, malt beverages or “versions” of the two.

But Modelo says when the company began producing hard seltzers with its trademark, Constellation violated the contract since the beverage is made from fermented sugar rather than malted grain.

“The hard seltzers at issue here are clear, fruity, carbonated drinks. They’re not malt beverages or beer on an ordinary understanding of those terms,” Jeffrey Bryan Wall, an attorney for Modelo said Tuesday. “To be a malt beverage or a version of a malt beverage, a drink has to have malt. To be a beer or a version of beer, a drink has to be fermented with malt and flavored with hops.”

Modelo’s case previously went to trial in the U.S. District for the Southern District of New York, in which a jury returned a verdict in favor of Constellation.

U.S. District Judge Lewis Kaplan, a Bill Clinton appointee, also said then that the definition of “beer” in the licensing agreement was ambiguous. As a result, Kaplan instructed the jury to read the contract as given and to not interpret the definition of beer using “plain, everyday language.”

But Wall said Tuesday that regardless of the agreement’s definition, beer has an “ordinary meaning” that the jury should have been instructed to consider during deliberations.

U.S. Circuit Judge Richard C. Wesley, a George W. Bush appointee, seemed to disagree.

“This agreement has an understanding of beer that is contrary to what a layperson man or woman would think as beer,” Wesley said Tuesday. “And so be it. You’re big boys and girls, you can do that.”

Wesley was joined on the panel by U.S. Circuit Judges José A. Cabranes, a Bill Clinton appointee and Raymond J. Lohier, a Barack Obama appointee.

According to Modelo, Constellation’s initial efforts to make a hard seltzer with a malt base failed so they resorted to using sugar while still attempting to utilize Modelo’s trademarks.

“They didn’t want to just make a hard seltzer. They wanted to make it and put the Corona label on it so they could compete in the market,” Wall said. “They tried to shoehorn it into a contract that doesn’t say anything about non-malt beverages.”

But Constellation argues that Modelo never specified that new recipes must include malt to be included in the contract.

“There’s no malt requirements in this contract. There’s absolutely nothing in this contract that says we are required to have malt,” Saundra Goldstein, an attorney for Constellation, said Tuesday.

Goldstein also said that the contract’s language that allows other “versions” of beer and malt beverages should include Constellation’s hard seltzers. She pointed to the contract’s stipulation that “non-alcoholic” beer is included in the licensing agreement which, she says, contradicts Modelo’s argument that the “ordinary meaning” of beer would preclude hard seltzer from being included.

“The one thing in my friends’ interpretation of beer… the one thing all of their dictionary definitions actually say is that it’s an alcoholic beverage,” Goldstein said. “Under their definition, beer is an alcoholic beverage.”

But Wall argued that’s too broad of an interpretation to consider a sugar-based hard seltzer as a “beer” or “malt beverage.”

“It doesn’t look, taste or smell like a beer,” Wall said.

Attorneys from both parties did not immediately respond for comment.

Follow @NikaSchoonover

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