by HIGH POINT – Motion furniture manufacturer Man Wah has sent a letter to retailers defending its business practices as part of an ongoing dispute with supplier Raffel Systems, which recently won a $106 million jury verdict against the company for its alleged stealing of intellectual property relating to Raffel’s functional cup holders used in motion upholstery.
A judge is expected to make a final decision on the actual jury decision sometime in the coming months.
Man Wah’s letter also is in response to Raffel’s recent announcement it plans to ask various federal agencies to investigate Man Wah’s business practices.
Man Wah USA President Gabriele Natale has responded to the allegations in a letter the company sent to dealers Monday, saying it stands behind the quality of its furniture and its business practices.
“As you may be aware, Raffel Systems a former supplier of ours and its attorneys are seeking to leverage a recent court decision and take advantage of political sentiment toward China to wage a baseless, reckless and absurd PR campaign against our company in a blatant attempt to discredit our character and respected standing in the market while raising its own profile,” Natale said. “We strongly disagree with the jury’s verdict in the case, which has yet to be approved by the judge, and plan to challenge it at the trial court level and on appeal, if necessary.”
He said in the meantime, Man Wah seeks to address what it describes as false accusations that Raffel has made since the verdict was made public June 17.
“As a holder of more than 300 patents, Man Wah respects and abides by intellectual property rights, and is proud to work with and support scores of small business suppliers in the U.S. and internationally,” Natale wrote. “We do not sell counterfeit products. In fact, we are known for our innovation and inventive approach, driven by our large, in-house R&D department.”
He said the case against Man Wah involved a single component used in one product line among Man Wah’s hundreds of offerings. This, he noted, represents a minute percentage of its overall product portfolio.
“That component, a lighted cup holder with a control switch, was manufactured by a third party and was discontinued more than three years ago,” Natale said. “Working with our retailers, we addressed any potential issues they had with these products.”
He added that after more than four years of use, there has not been “a single instance of any damage to persons or property caused by the cup holder component in question. And, as independent testing has verified, there is absolutely no evidence of any safety issues with this cup holder product. Any suggestion by Raffel otherwise is unsubstantiated fear mongering.”
He said that the company is taking steps to refute many false statements made to the media by Raffel and its attorneys.
“Although we contend Raffel’s PR-driven push for an investigation is meritless and entirely unwarranted, we are fully prepared, however, to openly discuss our operations with any government authority,” Natale continued. “As these events continue to play out, our hope is that they will have little or no impact on our ongoing business with you, our most valued customers. As such, we look forward to working with you as we always have in proudly offering our fine products to consumers across the U.S. and beyond.”
The company also issued the following rebuttal to each of Raffel Systems’ allegations:
| Correcting False and Misleading Public Statements Made by Raffel and Its attorneys/ political operatives at a June 30, 2022 tele-press conference. + False claim: Man Wah sells counterfeit products. Correction: Untrue. Counterfeit products are those that are passed off as genuine branded products. There is no evidence that Man Wah passed off the third-party cup holders as genuine Raffel products, nor would there be any reason to do so. Consumers don’t care about who makes the cup holder in the Transformer line of sofas. + False claim: Man Wah sold defective products to deceive furniture retailers and even Man Wah’s own employees. Correction: Untrue. All electronic products have some rate of failure. The third-party cup holders at issue during the trial had a higher defect rate than normal, which the manufacturer addressed. One retailer, ASI, cited a high number of defects and ultimately worked out a resolution with Man Wah to cancel orders, take back the inventory, and hold back payments of $1M to apply to any claims for defects. Almost all of the $1M was released, revealing that the problem was much less than believed by ASI, but ultimately Man Wah took responsibility and stood by ASI, which continues to be one of its top customers. There is no evidence that Man Wah deceived its customers or its own employees. The fact that Man Wah employees in the US were unaware that there was a second source of the cup holders is simply because the US employees are involved in sales and service, and the sourcing of components is handled by the purchasing department in China. + False claim: Man Wah’s only goal was to put Raffel out of business for daring to challenge Man Wah. Man Wah’s attempt was to “drain all of our resources” and “drown” Raffel in legal bills to put it out of business before the case ever reached trial. Correction: Untrue. Raffel appears to be relying on a statement in an email from Zoe Wong, taken out of context, saying that her dad wanted to “get rid of Raffel” meaning that after Raffel sued them and sent an announcement of the lawsuit to Furniture Today just before a major trade show in Las Vegas, he no longer wanted to do business with Raffel. Further, if anyone has been overly aggressive in litigating the case, it’s Raffel, not Man Wah. Man Wah in fact has prevailed on numerous issues before trial, including to cite just a few examples: a successful challenge to Raffel’s switch patent, which the Patent & Trademark Office concluded was invalid because Raffel offered those products for sale more than a year before filing for a patent (Raffel appealed the decision to the Federal Circuit Court of Appeals and lost); dismissal on summary judgment of Raffel’s claims for infringement of a design patent on its cup holder and its claims that black and silver cup holders infringed four of the utility patents asserted by Raffel; a finding by the Court that Raffel failed to prove that Man Wah’s redesigned cup holder infringed any of the patents asserted by Raffel; and dismissal of a later filed lawsuit against Man Wah’s customers alleging infringement of a new cup holder patent issued in 2021. The Court has also sided with Man Wah on many other motions filed by Raffel in the case. + False claim: Man Wah’s products pose “potential safety concerns,” create a “potential liability,” and its conduct is “dangerous to consumers.” Correction: Untrue. While there were some issues with static electricity affecting components on the circuit boards of these products, the circuit boards are enclosed in the same black rubber cover/shrink-wrap as Raffel’s products, which ensure that any static discharge is contained and will not spread. There is not a single instance of any damage to persons or property caused by these cupholders in the 4 ½ years they have been used in Man Wah sofas (discontinued in mid-2019). An independent third party confirmed that there was no safety issue, and Man Wah’s technical expert, Steven Ricca, was prepared to testify at trial if needed that there were no safety issues. That became unnecessary because the Court properly held that Raffel was not permitted to raise safety issues at trial, since this is not a products liability case. + False claim: Man Wah also improperly “copied three of our products.” Correction: Untrue. While not specified, the three products Raffel is apparently referring to are: (1) silver “CHB” cup holders that the Court found do not infringe Raffel’s patents; Raffel never asserted trade dress or any other claims as to these cup holders; (2) a silver switch; Man Wah successfully invalidated Raffel’s patent on this switch and, as Raffel knows, a party cannot infringe an invalid patent; and (3) a four-button switch that’s a common design; Raffel does not claim patents or trade dress on this switch. + False claim: We are “innovators” and “explorers,” and “work tirelessly to improve the lives of others through invention.” Correction: Untrue. Raffel has in fact done very little in terms of innovation. The “15 patents” on its integrated cup holder are all based on an application filed in 2005 and represent no more than attempts to tweak the claims of its patents to cover competitors’ products. This is not innovation, it is an attempt to corner the market on a simple concept, a lighted cup holder with controls. + False claim: Man Wah paid a low level Raffel employee, Michael Burwell, a convicted felon, $60,000 to claim he had invented the integrated lighted cup holder, which was “fake claim” by a “fake person” and “nothing more than a diversion” and “attempt to get us to spend more money and defend ourselves.” Correction: Untrue. Ken Seidl, an inventor on the patents at issue and former VP of sales of Raffel, testified under oath at deposition that Mr. Burwell came up with key aspects of the lighted cup holder, including the light pipe and light sensor. Man Wah then sought out Mr. Burwell, who explained his role in the invention and provided a sample circuit board and some sketches he had from his work on the project, and paid him $60K to assign his rights to Man Wah. During discovery, it was revealed that Mr. Burwell had some earlier convictions, including for drug use, which Man Wah was unaware of, but ultimately were irrelevant to the issue of inventorship. The Court held a two-day hearing on inventorship and in a detailed opinion, found that Man Wah had failed to meet the high burden of clear and convincing evidence to show that Mr. Burwell should be added as an inventor because of, in the Court’s view, the absence of sufficient documentary evidence to corroborate his contributions. The Court did not, as Raffel suggests, reject the claim of inventorship out of hand, but considered it carefully. + False claim: Man Wah filed “baseless” “retaliatory” lawsuits in China against Raffel which coincided with positive outcomes for Raffel in the US litigation. Correction: Untrue. Man Wah did file three lawsuits against Raffel in China, but they were not “retaliatory.” It was entirely Man Wah’s right to seek legal relief for Raffel’s wrongful acts involving Raffel and its Chinese subsidiary through the courts in China. There is also no basis for Raffel’s position that the lawsuits came after positive developments for Raffel in the U.S. litigation. Indeed, there were relatively few positive developments for Raffel until the Wisconsin jury verdict. Nor is there any support for Raffel’s claim that these cases in China are baseless. In fact, the first lawsuit in China resulted in an award to Man Wah of around the equivalent of $1.5M (USD). Moreover, there is absolutely no basis for Raffel’s suggestion that the timing of the court’s decision in China in favor of Man Wah coincided with the jury trial in Wisconsin; Man Wah has no control over when courts in China make their decisions. + False claim: Man Wah sent a letter to the trade in January 2019 blaming Raffel for the defective cup holders. Correction: Untrue. The letter was prepared and sent to Man Wah customers after Raffel deliberately sent notice of the lawsuit to Furniture Today just before the Las Vegas trade show, an obvious attempt to harm Man Wah’s business. Man Wah felt it important to tell its side of the story, but there is absolutely nothing in the letter which blames Raffel for any defects in the cup holders and the letter did not even mention the cup holders. The letter simply noted Man Wah’s displeasure that one of its suppliers had sued it. Nor is there any evidence that it had a “dramatic effect” on Raffel’s business or that its “reputation is forever tarnished,” and Raffel cited no specifics at trial. The only response to the letter was from a Man Wah customer expressing concern about whether the lawsuit would affect Man Wah’s ability to continue to supply it with product. + False claim: Raffel tried to hire away Ken Seidl after the litigation began “in an attempt to gain leverage” in the lawsuit. Correction: Untrue. RMT, a Man Wah affiliate, was looking to hire someone in an executive position. It had a phone interview with Ken Seidl, unaware of his connection to the litigation. No offer was made and the process never advanced beyond the initial telephone interview. There is absolutely no evidence that this was an attempt to gain leverage in the lawsuit. + False claim: Man Wah’s continued to source 10-20% of its supply from Raffel in order to deceive Raffel. Correction: Untrue. Raffel participated in a quarterly bidding process in which Man Wah allocated quantities to different suppliers based on price and quality. Raffel knew that it was receiving a lower share because its prices were too high. Man Wah wanted to maintain two suppliers for the cup holders. Indeed, all major furniture manufacturers generally require multiple suppliers for components; otherwise, disruption from one supplier can cause delays in shipments which would be harmful to their customers. There was no effort to deceive Raffel. + False claim: Man Wah had its supplier put Raffel patent numbers, PO numbers and manufacturing dates on the labels of the black cup holders in order to deceive consumers. Correction: Untrue. Man Wah was unaware that there were labels on the bottoms of the cup holders with Raffel information and when the lawsuit was filed, it immediately instructed its supplier to stop using the labels and removed the labels from the cup holders in its inventory. Raffel cited at trial an email from Guy Ray, who acknowledged that his comment was speculation and that he had no knowledge of the sourcing of the cup holders, which was handled by Man Wah’s purchasing department in China. Indeed, the name “Raffel” does not even appear on the labels, and there would be no reason for Man Wah to include labels with Raffel patent numbers on the cup holders. It was undisputed that customers do not see the labels when the cup holders are installed in furniture, and Man Wah does not promote the cup holders separate from the furniture. No consumer, even if they looked at the labels, would associate the patent numbers with Raffel unless they looked up the patent numbers; there was no evidence that any consumer ever did so. Indeed, Paul Stangl admitted at trial that there was no evidence of any lost sales to Raffel because of the labels. + False claim: Man Wah was found in contempt because it intentionally violated the Court’s preliminary injunction by continuing to sell furniture with the accused cup holders after the injunction issued. Correction: Untrue. After the preliminary injunction issued, Man Wah employees in the U.S. resold inventory that was returned by ASI to three customers but only on the condition that they would switch out the cup holders in the sofas for Raffel cup holders, which Man Wah provided; take photos and provide evidence that the cup holders had been switched out; and sign an agreement that the customers would abide by these conditions. Man Wah believed that this complied with the preliminary injunction because Raffel cup holders would be swapped out for the existing cup holders, but the Court disagreed, finding that this was nevertheless a sale in violation of the injunction. While Man Wah agreed to sanctions as a result, reserving its right to challenge the finding of contempt later, there was no intentional violation of the injunction. + False claim: Man Wah “stole” Raffel’s intellectual property and the jury found that Man Wah was “a thief” and “guilty of theft.” Correction: Untrue. This was not a criminal trial and there was absolutely no finding of stealing or theft. A finding of infringement of trade dress or patent infringement is not a finding of “theft.” Lanny Davis, Raffel’s attorney/Washington political operative, uses these terms loosely and recklessly. + False claim: The jury has already found Man Wah engaged in “unfair competition” which will be investigated by the FTC. Correction: Untrue. Again, Lanny Davis is using these terms loosely and recklessly. There was no finding of “unfair competition” and certainly not as contemplated by the FTC. Otherwise, every finding of infringement would be investigated as “unfair competition” by the FTC which is clearly not the case. The FTC investigates unfair competition and practices that harm consumers, such as false advertising. There is no reason to believe that the FTC would be interested in the conduct at issue here. + False claim: The ITC will investigate Man Wah’s unfair competition as found by the jury and exclude Man Wah’s products from importation. Correction: Untrue. The ITC would, even if a violation were found, only exclude products found to infringe, not Man Wah products generally or unfair competition generally, and only after a procedure involving discovery and a trial before the ITC. Man Wah stopped importing sofas with the black cup holders in the middle of 2019, and there is a question about whether the ITC would even initiate an investigation under such circumstances. Even if it did, any ITC investigation would have no real impact on Man Wah’s business. The ITC cannot award monetary damages, only exclude the importation of infringing products. And as noted above, there would be no basis for any finding as to other products such as the silver cup holders, silver switches, or 4-button switches. Lanny Davis, who made this threat, is either deliberately misleading or has no idea how Section 337 cases at the ITC actually work. + False claim: The CPSC will investigate these products that represent “potential safety risks” and could lead to a product recall. Correction: Untrue. As noted above, there are no safety risks with these products, which have been in the market for over four years without a single instance of damage to consumers or property, and certainly no basis for a CPSC investigation or product recall. + False claim: Congress will be interested in this matter because it involves theft of intellectual property. Correction: Untrue. There is no reason why Congress would be interested in this case. They have more important matters to deal with than a case involving trade dress and patent infringement. + False claim: Man Wah is “proud of it being a bully and not caring about getting caught when it gets caught stealing.” Correction: Untrue. Man Wah has defended the litigation fairly, cooperated fully in producing documents and witnesses for deposition, and defended itself at trial. Many rulings of the Court have been in favor of Man Wah. There is no evidence of “stealing” by Man Wah, nor has it behaved as a “bully” at any point in the litigation. This is just Raffel’s one-sided and distorted spin of a commercial dispute between Man Wah, a leading global furniture manufacturer, and Raffel, a Wisconsin company whose parent company, Innovative Motion Technologies, is owned by Cathay Capital which manages over $4 billion in assets worldwide, according to trial testimony from Raffel’s President. |
Raffel Systems legal counsel made the following statement in response to Man Wah’s letter to dealers:
Man Wah’s latest attempt to convince the industry it did not steal Raffel’s intellectual property is nearly identical to its effort at trial, which resulted in a unanimous guilty verdict and one of the largest financial penalties in Milwaukee’s federal court’s history,” John Scheller, lead attorney for Raffel Systems, told Home News Now. “The undisputed facts are that Man Wah deliberately copied Raffel’s intellectual property, proactively included Raffel’s patent number on its own counterfeit product, and its former U.S. CEO admitted to doing so in emails. The jury reviewed all of this evidence and more at trial and decided resoundingly in Raffel’s favor. Man Wah’s latest attempts to describe itself as an upstanding corporate citizen are laughable given the large body of evidence against Man Wah that was brought to light in the public trial, which Raffel will continue to shine a light on to the industry and to relevant governmental agencies.”
