Modelo, Constellation clash over meaning of 'beer' in US appeal

March 12 (Reuters) - Constellation Brands (STZ.N) and Anheuser Busch InBev's (ABI.BR) Grupo Modelo sparred over the definition of beer at a U.S. appeals court on Tuesday, as Grupo Modelo seeks to revive a lawsuit claiming Constellation's Corona and Modelo hard seltzers violate its trademark rights.

Judges at the 2nd U.S. Circuit Court of Appeals in Manhattan grilled attorneys for both sides over the scope of the term "beer" in the companies' distribution contract. The panel appeared inclined to favor Constellation's interpretation and uphold the verdict.

"You two have been driving me and my clerks crazy," Senior U.S. Circuit Judge Richard Wesley said. "Only lawyers can argue about what is the meaning of beer."

InBev in 2013 purchased Mexico-based Modelo, whose beers Constellation distributes in the United States. Modelo sued Constellation in 2021, claiming its Corona Hard Seltzer and Modelo Ranch Water breached their contract and infringed Modelo's trademarks.

Modelo said that Constellation's distribution agreement only allows it to sell beer and malt beverages with Modelo's branding. Constellation argued that the agreement's definitions of "beer" and "malt beverages" also cover its hard seltzers.

A federal jury in Manhattan agreed with Constellation last year that the contract encompasses its Modelo-branded drinks. Wesley questioned Modelo's argument on Tuesday that the common definition of "beer" should have applied in the case.

"The simple fact of the matter is that the common usage of the word 'beer' is separated from this agreement," Wesley said. "And so be it — you're big boys and girls, you can do that."

Wesley also noted that the companies' agreement allowed Constellation to sell the clear alcoholic drink Zima, which he said was "about as much a beer as a Cadillac is a Volkswagen."

"They're both cars, but they're hellaciously different," Wesley said.

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.