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UPDATE 1-AB InBev takes Constellation to U.S. court over Corona brand name

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(Adds Constellation comment)

By Philip Blenkinsop

BRUSSELS, Feb 15 (Reuters) - The Mexican arm of drinkscompany Anheuser-Busch InBev accused U.S. firmConstellation Brands in a lawsuit filed on Monday ofbreaching a deal on the use of the Corona brand name by applyingit to a product other than beer.

Constellation has used the name for its Corona Hard Seltzer,a sparkling water with alcohol and flavouring, one of severalseltzer drinks that have become very popular in the UnitedStates.

The case is the latest in an increasingly competitive andlitigious U.S. brewing market.

Grupo Modelo filed its suit in the U.S. district court ofthe southern district of New York on Monday, according to acourt filing. AB InBev, which confirmed the filing, said it hadfailed to settle the matter with Constellation directly.

When AB InBev took full control of Grupo Modelo in 2013, itagreed with U.S. antitrust regulators to sell Grupo Modelo'sbusiness in the United States to Constellation, including theCorona brand. AB InBev retained rights to Corona and otherModelo brands in Mexico and elsewhere.

Modelo said the licensing arrangement for Corona onlyextended to beer and did not include hard seltzer.

Constellation said it was "very surprised" by thedevelopment and said Modelo's claims, including that its seltzershould not be classified as a beer, were without merit and werean attempt to restrain a strong competitor.

It said it had "fully and completely" complied with theterms of the sub-licence agreement and would vigoroustly defendits rights.

Constellation launched Corona Hard Seltzer in February 2020and said in October the brand had a 6% share of the U.S. seltzermarket, making it the fourth-biggest brand in the segment.

The top spots are held by Mark Anthony Brands' White Claw,Boston Beer's Truly and Anheuser-Busch's Bud LightSeltzer.

AB InBev's U.S. arm Anheuser-Busch won on appeal in May in along-running case against rival Molson Coors overadverts highlighting the use of corn syrup in the Molson Coors'drinks Coors Light and Miller Lite.

A U.S. court also ruled this month that Anheuser-Buschshould stop marketing new Michelob Ultra Organic Seltzer as thefirst and only seltzer certified as organic by the U.S.Department of Agriculture after a challenge from an Oregon-basedbrewer.(Reporting by Philip Blenkinsop; Editing by Edmund Blair,Kirsten Donovan)