Home Trade industry Germantown firm wins jury trial against Chinese manufacturer

Germantown firm wins jury trial against Chinese manufacturer

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A federal jury on Friday awarded more than $100 million in damages to a Germantown company that accused a Chinese furniture maker of stealing its intellectual property – the design of a lighted multifunctional cup holder.

The jury found Man Wah Holdings LTD. had infringed Raffel Systems LLC’s patent and intentionally misappropriated its “trade dress” for the cup holder, and even put stickers with Raffel’s patent number on the tampered components.

The jury awarded approximately $9.3 million in actual damages for the false branding, patent and trade dress violations. He added $97.5 million in punitive damages for the malicious appropriation of Raffel’s business attire, the overall appearance of the cup holder.

A Germantown company claims that the cup holder/controller on this Chinese lounge chair is a counterfeit version of its own patented product.

The 12-person jury returned the verdicts on Friday afternoon, after about six hours of deliberations following a two-week trial. Raffel or Man Wah officials had no immediate comment on the verdicts.

About two dozen employees of Raffel Systems LLC in Germantown — most of its staff — crowded into a small courtroom gallery at the Milwaukee federal courthouse on Thursday, all wearing company shirts.

They came to hear final arguments in Raffel’s case against Man Wah Holdings LTD, a Chinese furniture giant Raffel accused of illegally copying its lighted cupholder controllers used in theater-style seating manufactured by Man Wah and several other companies.

John Scheller, an attorney at Michael Best & Friedrich in Madison, called Man Wah’s strategy a “deliberate, planned and destructive copying” of Raffel’s intellectual property.

“Without a doubt, they wanted to get rid of us. Most small businesses wouldn’t resist Man Wah, but they underestimated the strength of Raffel’s people.

Man Wah denied infringing on any patents or trade dress associated with Raffel’s cup holders, and portrayed the Wisconsin company as simply trying to capitalize on a short-term mistake into a giant corporate gain. foreign.

“It’s their pot of gold,” said Michael Lindinger of Washington, D.C. “They’re seeking damages from Man Wah’s profits selling furniture.”

Lindinger noted that some Man Wah officials were also present, from China, “because it’s important to them too.”

Simple idea, big deal

According to his website, Mark Raffel owned a furniture store in Milwaukee in the 1980s when he began working on ways to integrate motors and heaters to increase comfort. Today, the company does business globally, providing controls and features for furniture, RVs, theaters and more.

The lawsuit says employee Ken Seidl came up with the idea for a lighted cup holder at the 2005 furniture show in North Carolina. It evolved to include tilt controls, footrests, headrests, massagers, and other functions on theater-style seats and other so-called motion furniture. Raffel obtained several patents.

It quickly became a popular component for dozens of manufacturers. Man Wah was a huge account, but Raffel insisted that the Chinese company’s typical vendor agreement be changed: he couldn’t copy the cup holder.

Raffel employs around 30 people in engineering, design and administration at its Germantown headquarters, but manufactures most products at a Chinese subsidiary.

In late 2017, Man Wah contracted another Chinese company to manufacture the same units, for less than Raffel was charging. Not only were the cupholders “identical”, in design and appearance (but not in reliability), but the counterfeits even had stickers with Raffel’s patent number.

In mid-2018 the counterfeits were failing, Raffel discovered the problem and took legal action.

Man Wah made changes to the holders he had created, to clarify that they were not Raffel forgeries. According to trial testimony, approximately 60,000 of the counterfeits were used in various Man Wah seats sold under multiple brand names in 2018.

Raffel’s attorney said there are still some 14,000 counterfeits in circulation, meaning Raffel faces the possibility of trademark damage for years to come.

Counterfeits damage Raffel’s reputation

During closing argument, Scheller said Man Wah clearly knew about Raffel’s patents before ordering the cheaper counterfeit cup holders. Man Wah also continued to buy cup holders from Raffel, but in decreasing numbers. Scheller said it was a cover-up, intended to make Raffel believe that his own products were in all the furniture Man Wah continued to sell.

Counterfeits quickly proved problematic. Major US retailers who bought from Man Wah reported numerous breakdowns and believed Raffel’s products were faulty, as Man Wah blamed Raffel.

“Our reputation is forever tarnished,” Scheller told the jury.

The nearly two-week trial before U.S. Magistrate Judge Nancy Joseph included recorded and live testimony, some from China via Zoom, and wrestling experts trying to break down the technical and arcane aspects of patent and trademark law. for jurors.

Raffel sought more than $10 million and damages for patent infringement, trade dress infringement, misappropriation, and misbranding. Scheller suggested the jury could award even more punitive damages.

“How do you deter someone like Man Wah?” Scheller asked, suggesting that only a really big reward would get the attention of a really big company. He did not specify a figure.

For Man Wah, Lindinger argued that Raffel never backed up his claims of dominance in the seating control market, tied specific research and development expenditures, particularly the cupholder, or provided evidence as to to the value of the company’s goodwill, which she says has now been damaged. .

Lindinger said Raffel’s total revenue from cupholder sales from 2016 to 2018 was $24.4 million, and yet he was seeking between half and that much damages from Man Wah.

Lindinger also argued the defense that the cup holder had little trade dress to protect because it was primarily functional, and its appearance and design resulted from functionality. “Trade dress” refers to a kind of protection for products that would not qualify under patent or trademark law.

Man Wah argued that no consumer has ever been confused by fake cup holders, because no one buys the furniture just because it contains Raffel components. No one would know Raffel made the brackets unless they take the couches apart, he said.

Scheller argued that he didn’t have to prove the potential for confusion, because there was so much real confusion – among manufacturers, retailers and consumers, and even Man Wah himself. He noted that after the counterfeits began to fail, Man Wah workers sent more counterfeits as replacements when they intended to send Raffel cup holders.

During pre-trial litigation, Joseph had narrowed the claims and counterclaims of the case and concluded that Man Wah had infringed an aspect of a Raffel patent. Lindinger argued that the patent was invalid because aspects of the claimed novel invention were simply obvious to anyone in that industry.

Lindinger noted that although Raffel officials said the cup holder was the company’s flagship product, it was not prominently featured in its catalogs, nor mentioned during occasional articles about Raffel in a magazine. of the furniture industry.

Contact Bruce Vielmetti at (414) 224-2187 or [email protected] Follow him on Twitter at @ProofHearsay.