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Definition of “Beer” in trademark license is “ambiguous”, says Court. Costs brewer million$

A federal appeals court ended a years-long lawsuit over the right to sell CORONA Hard Seltzer when it ruled that the definition of “beer” in a trademark license agreement was ambiguous. The case is a cautionary tale about the importance of precision when drafting intellectual property agreements.

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 The Trademark License for Beer

“Modelo” makes and sells CORONA beer in Mexico and other countries. “Constellation Brands” (hereafter “Constellation”) makes and sells CORONA beer in the U.S. pursuant to a license from Modelo.


The trademark license agreement between Modelo and Constellation defines “Beer” as “beer, ale, porter, stout, malt beverages, and any other versions or combinations of the foregoing, including non-alcoholic versions of any of the foregoing."


Constellation Launches Hard Seltzer

In early 2020, relying on its license with Modelo, Constellation launched CORONA Hard Seltzer with a $40 million marketing blitz.


An irate Modelo claimed Constellation had no right to make CORONA-branded hard seltzer because Constellation’s license was limited to “beer”.


Modelo contends that hard seltzer – which is made from fermented sugar – does not contain the essential ingredients of beer (namely, malt and hops), and therefore, it falls outside the scope of Constellation’s license.


Constellation saw things differently, and a lawsuit ensued.


Legal Maneuverings

Modelo moved for summary judgment, arguing that the term “beer” was unambiguous as a matter of law. The motion was denied.


The district court ruled that the definition of “beer” was, in fact, ambiguous and that it was unclear whether the definition included hard seltzer.


At trial, Modelo asserted that “beer”– by definition– must be made of hops and malt, and since hard seltzer contained neither, it could not plausibly be considered a version of “beer” or “malt beverage”.


Constellation countered that Modelo’s  interpretation of “beer” was too narrow.


Constellation’s argument went as follows. The agreement authorizes Constellation to make  “other versions” of beer, including  a non-alcoholic version—i.e.  a version that is contrary to the ordinary definition a “beer” (which says that beer contains alcohol). Logically,  then, Constellation contends, the agreement also affords it the latitude to make other, atypical versions of beer—such as a version that does not contain the traditional ingredients of malt and hops.


Last year, a jury ultimately sided with Constellation and found that “beer,” at least as used in the license agreement between Modelo and Constellation, did include hard seltzers. Modelo appealed, but Constellation’s victory was upheld in a ruling handed down in March of this year.



 A few words can have enormous impact. Intellectual property owners should beware of words that create broad definitions. Uncertainty in verbiage may come back to bite an incautious licensor.


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Disclaimer: the foregoing is for informational purposes only and should not be considered legal advice. The content is provided as-is and no representation is made that it is error-free. Readers should contact a licensed attorney to obtain advice with respect to their specific legal matter.



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