Silicon Valley Company Sues Walmart for $2 Billion

LITTLE ROCK (CN) — A Silicon Valley company sued Walmart for $2 billion Wednesday, claiming the world’s largest retailer stole its trade secrets on “freshness management” technology for reducing food waste.

More than $85 billion worth of fresh food — nearly 33 percent of all fresh food — is wasted each year in the United States, ag-tech company Zest Labs claims in federal court. The waste is known in the industry as fresh food shrink. Walmart loses nearly $3 billion a year to it, Zest says.

Zest, formerly known as Intellex, says it began developing its Zest Fresh management system in 2010, “the industry’s first proactive solution for managing the delivered freshness of produce and proteins.”

“Over the course of a multiyear relationship, and ending in late 2017, Zest Labs engaged in significant discussions, presentations, demonstrations, and product trials with Walmart,” the complaint states.

It adds: “A large number of Walmart employees gained direct access to Zest Labs’ trade secrets and confidential information, including members of Walmart’s executive leadership team. After accessing Zest Labs’ trade secrets for years, Walmart abruptly terminated the trials in November 2017, and told Zest Labs it was no longer interested in Zest Fresh.”

Zest says it was “stunned” when, “just four months later, Walmart announced a system that looks, sounds, and functions very similarly to Zest Fresh,” which Walmart claimed had been “developed in just six months by [Walmart’s] own associates.”

“That statement is false and, in reality, Walmart used its years of unfettered access to plaintiffs’ trade secrets, proprietary information, and knowhow to steal the Zest Fresh technology and misappropriate it for Walmart’s own benefit,” the complaint states.

“We were surprised and concerned by how similar Walmart’s Eden description was to Zest Fresh,” Zest Labs CEO Peter Mehring said in a statement. “Like most innovative companies, we believe strongly in the need to protect our intellectual property, recognizing the importance of preserving the value for our shareholders and customers.”

Zest Labs claims that based on statements by Walmart executives, Walmart knew all along that it never planned to pay Zest to use Zest Fresh, “but rather planned to learn all it could about Zest Fresh and then take that knowledge for Walmart’s use on Eden.”

“Walmart integrated the Zest Labs technology into Eden without authorization and without compensating Zest Labs,” the complaint states.

Walmart spokesman Randy Hargrove said his company will respond to the lawsuit in court.

Zest Labs and its parent company Ecoark Holdings, based in San Jose, California, seek damages for trade secrets violations, unfair competition and breach of contract.

Their lead attorney is Fred Williams with Vinson & Elkins in Austin, Texas. Their Little Rock attorneys are with McDaniel, Richardson & Calhoun.

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