When is a seltzer a beer? When does a license to use a trademark give someone free rein to do whatever they want with it?
At first, these two questions appear to have little in common with each other, but they both come up in a legal dispute currently moving through New York courts.
Corona beer and Corona seltzer
According to a Reuters news report, a Manhattan judge recently cleared the way for a lawsuit between beermaker Grupo Modelo, the owner of the Corona beer trademark, and beverage maker Constellation Brands over Constellation’s marketing of Corona hard seltzer.
In 2013, Constellation acquired a license from Modelo that allowed the company to sell beer using the Corona trademark. According to the lawsuit, Constellation later started selling alcoholic seltzer under the Corona name, as well.
In its legal filings, Modelo has claimed that its licensing agreement allowed Constellation to sell only Corona beer, not seltzer using the same trademark. In court, Constellation argued that the definition of beer under the terms of the contract can also include seltzer. Modelo disagrees.
Get it in writing
Intellectual property licensing can be very lucrative. If your company has a well-known trademark, you can command good fees by letting other companies market their products under your mark. When you are the licensor, you don’t necessarily have to manufacture anything or provide any further services. You let the licensee do the hard work and you collect the fees.
However, this kind of relationship comes with risks. If your licensee’s products or services are not good, they could hurt the value of your trademark. And in some cases, a licensee may try to stretch the limits of what it can get away with.
It’s important for both licensors and licensees to have legal guidance from experienced attorneys.