Raffel Systems plans to request federal investigations into Man Wah’s conduct

The company seeks U.S. Federal Trade Commission and U.S. International Trade Commission inquiries into alleged unfair trade practices and a CPSC review of product safety.

GERMANTOWN, Wisc. — Attorneys for Raffel Systems said during a press conference Thursday they plan to ask federal agencies to perform an investigation into the business practices of motion furniture manufacturer Man Wah Holdings Ltd.

The announcement comes nearly two weeks after a jury awarded an historic $106.2 million in damages to Raffel, finding Man Wah liable for “willful trade dress infringement, misappropriation of trade dress, false patent marketing and willful patent infringement” related to Raffel’s patented illuminated and integrated cup holder used in motion upholstery.

The verdict, one of the largest in the Eastern District of Wisconsin, awarded Raffel Systems $97.5 million in punitive damages and $8.7 million in actual damages. An actual award could be closer to $10 million due to a cap on punitive damages in the State of Wisconsin.

Man Wah said it may appeal the verdict and noted the case represents a “minute” portion of its offerings.

But Raffel plans to pursue further action regardless in light of concerns that Man Wah will continue its alleged deceptive trade practices.

Lanny Davis, an attorney for Raffel Systems, said that the company specifically plans to request an investigation of illegal and unfair competition by the Federal Trade Commission and the International Trade Commission.

He noted that an FTC investigation could spur an enforcement action against Man Wah that results in financial penalties and a barring of the company from doing any type of business in the U.S. that represents unfair competition. An investigation by the ITC could potentially result in action that bars the company from importing products into the U.S.

“The definition of unfair competition is a finding by a jury that somebody has stolen intellectual property — a patented cupholder in this case — and that, by definition, is unfair competition,” Davis said. “Usually when you approach a federal agency you have to prove wrongdoing, and that has already occurred — there has already been a jury verdict.”

He said the same burden of proof necessary for an ITC investigation also has been established.

“Again we have a verdict by definition that Man Wah has already been found by a jury to have engaged in unfair competition,” he added in reference to the alleged theft of Raffel’s patented intellectual property. “So we will be asking the International Trade Commission to investigate. One of the sanctions available through the International Trade Commission, which we will be asking them to examine as an option, is to exclude and bar any importation of any of Man Wah’s  products — certainly any importation of knockoffs and counterfeited products. That, we have reason to believe, is a continuing activity.”

Attorneys also plan to bring the matter before the United States Consumer Product Safety Commission, potentially spurring a recall of any products bearing the counterfeit cupholders. In addition to the counterfeit cupholders malfunctioning — which alerted Raffel that its products were being knocked off in the first place — officials believe there could be safety issues involving the faulty electronics.

“It (the CPSC) has a federal mandate to look into any into any products that represent a risk to consumers,” Davis said, adding that it is a “violation of federal law if any company knows of a potential risk to a consumer without immediate disclosure — and I mean immediate.”

“Man Wah had reason to believe these defects could pose substantial risk of liability to customers,” said John Scheller, the lead attorney in the case. “And, according to the undisputed evidence presented to the jury, Man Wah’s theft of Raffel’s proprietary invention was willful.”

During the press conference, he said former Man Wah CEO Guy Ray alerted management of the problems and potential liability with the counterfeit cupholders, noting that the situation resulted from Man Wah’s use of two suppliers for many of the same components, apparently to achieve lower costs.

But the use of two suppliers in this case also caused major confusion internally as it was extremely difficult to tell the real components from the fake ones. This same confusion, he noted is likely to occur in the marketplace as just about everything about the units is the same including labels bearing the same patent numbers and manufacturing dates.

Scheller presented two of Ray’s emails during Thursday’s press conference, which also were presented to the jury during the trial. 

  • On November 26, 2018, Ray wrote to Man Wah executive Tommy Wong: “The dumbest thing we did, was have the new supplier use raffel patent # and description on each piece. Not only is that patent infringement, but it is fraud which if raffel wanted to pursue, could be escalated to criminal charges in addition to the civil charges already filed.”
  • On December 20, 2018, Ray wrote in another email to Wong: “This is absolute b**ls s**t and I’m telling you now, we stand to lose 100m in business that we will never recover if we do not take care of this. Who is getting fired at Manwah because of this???”

Yet Ray’s communications apparently fell on deaf ears as company ownership took days if not longer to respond to his emails, a situation that Scheller described during the press conference.

“Again there were ongoing failures, and Man Wah was confused about which cupholder was which,” Scheller said, adding that this led to the replacement of defective cupholders with other defective units.

“Obviously at Raffel, we are concerned about defects reported by consumers of the cupholders that were found by the jury to infringe on Raffel patents and present safety risks,” Scheller said. “And we know that thousands of fake knock offs have been shipped and sold to United States consumers. We are very concerned that Raffel will be dragged into the problems rising from defective knock offs.”

“The jury clearly saw through Man Wah’s defenses, and the jury spent a tremendous amount of time paying attention, Scheller added. “They knew all the evidence and requested certain exhibits through their deliberations, which were some of the key documents that I have just discussed. We appreciate the jury’s time and dedication, and we believe the jury’s verdict was correct and will be upheld and we look forward to continuing on with our fight against Man Wah and revealing what they have done to the U.S. market and to U.S. consumers.”

Man Wah USA President Gabriele Natale issued the following statement to Home News Now regarding this latest development:

“We strongly disagree with the Jury’s verdict, which among other things is inconsistent with the laws governing punitive awards in the State of Wisconsin and has yet to be approved by the judge,” he said, adding, “We plan to challenge the verdict at the trial court level and if necessary appeal.”

“Man Wah is proud of our reputation for excellence and innovation earned over three decades as one of the world’s largest furniture manufacturers, and we stand firmly behind the quality and integrity of our furniture and business practices,” he added. “As itself, a holder of more than 300 patents, Man Wah respects and abides by the intellectual property rights, and is proud to work with and support scores of small business suppliers in the U.S and internationally. This case involves a single component, made by a third party that was discontinued more than three years ago, and the Man Wah product at issue represents a minute percentage of Man
Wah’s hundreds of offerings.

“As independent testing has verified, there is absolutely no evidence of any safety issues with these products and we reject any such claims as false. Though we believe Raffel’s publicity-driven push for an investigation is meritless and entirely unwarranted, we are fully prepared to openly discuss our operations with any government authority”

Thomas Russell

Home News Now Editor-in-Chief Thomas Russell has covered the furniture industry for 25 years at various daily and weekly consumer and trade publications. He can be reached at tom@homenewsnow.com and at 336-508-4616.

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