Constellation defeats InBev appeal over Corona, Modelo seltzer branding

March 25 (Reuters) - A U.S. appeals court on Monday upheld a jury's verdict that Constellation Brands' (STZ.N) Corona and Modelo hard seltzers do not violate the trademark rights of Anheuser Busch InBev's (ABI.BR) Grupo Modelo, the maker of Corona and Modelo beers.

The 2nd U.S. Circuit Court of Appeals said the jury properly determined that Constellation's contract to distribute Modelo beers in the U.S. also allowed it to sell hard seltzers using Modelo brand names, in a case that revolved around the companies' definition of "beer."

A spokesperson for Grupo Modelo said that it was disappointed with the decision and "never agreed that Constellation had the right to use our iconic Corona and Modelo brands for sugar-based seltzers that are clearly not Mexican cervezas."

A Constellation spokesperson said the company was pleased with the decision and looked forward to "putting this issue behind us."

InBev purchased Mexico-based Modelo in 2013. Modelo sued Constellation in 2021 and alleged that Constellation's Corona Hard Seltzer and Modelo Ranch Water breached a provision of their distribution agreement and infringed Modelo's trademarks.

Modelo said that their agreement only allowed Constellation to sell beer and malt beverages using Modelo's branding, while Constellation argued that the agreement's definition of "beer" also covered its hard seltzers.

A federal jury in Manhattan agreed with Constellation last year that the contract allowed for its Modelo-branded seltzer drinks.

On Monday, a three-judge 2nd Circuit panel affirmed that the contract's definition of "beer" was ambiguous enough that a jury had to resolve the question. It also rejected Modelo's challenge to the court's jury instructions on interpreting the agreement.

The case is Cerveceria Modelo de Mexico S de R.L. de C.V. v. CB Brand Strategies LLC, 2nd U.S. Circuit Court of Appeals, No. 23-810.