Rogers-based Ecoark sues Walmart, alleges the retailer stole its technology

Parvez Musani, Walmart’s vice president of supply chain technology, announced in March a new technology to improve the freshness of produce it sells. The technology was dubbed Eden and Walmart filed two patents to secure its rights.

But Rogers-based Ecoark is alleging the retail giant’s Eden technology looks a lot like the information it shared with Walmart between 2014 and 2017 during a pilot of Zest Labs, a subsidiary of Ecoark. Zest Labs and Ecoark filed suit against Walmart on Wednesday (Aug. 1) in the U.S. District Court in Little Rock claiming Walmart stole its technology that prolongs shelf life of produce to reduce spoilage, which costs the retailer an estimated $400 million annually. Plaintiffs estimate damages to exceed $2 billion.

Walmart has said it respects the intellectual property of others and will defend itself against the charges.

The 28-page complaint lays out a timeline to show how Walmart had access to its own patented technology known as Zest fresh ZIPR.

In early 2014, Walmart and Zest Labs (then known as Intelleflex Corp.) began discussions to analyze Walmart’s fresh food shrink problem and how Zest Labs could assist. On March 5, 2014, Walmart and Zest Labs entered into a confidentiality agreement and document of understanding. Beginning in the fall of 2014, representatives of Zest Labs engaged with Walmart regarding Zest Labs fresh technology.

In March 2015, Walmart Senior Vice President Shawn Baldwin visited a Zest Labs active site. In 2016, Walmart committed to a pilot and deployment of Zest Labs technology. On Aug. 23, 2016, a team of Walmart employees made a site visit to some of Zest Labs’ growers and met with Zest Labs management.

Through April 2017, Zest Labs ran a continued pilot with Walmart that resulted in improved delivered freshness of Walmart’s produce. The plaintiffs said over the course of multiple pilots with Walmart that Zest Labs spent millions of dollars in out-of-pocket costs and saved Walmart money in the process.

In mid-2017 the pilot testing and conversations with Walmart continued. In late 2017, Walmart indicated it was not interested in Zest Labs’ technology and instead said it planned to build its own system for reducing fresh food shrink.

Just four months later, Zest Labs said it was surprised to see Walmart’s new Eden system, which the retailer claimed was developed in a hackathon over the prior six months. The Eden technology inspects fruits and vegetables for defects and can accurately predict the exact date when the food will spoil. To monitor temperature, Walmart attached tracking devices to cases of produce as they traveled on trucks between farms, distribution centers and stores. If the temperature rises above optimal ranges during travel, the Eden system will reroute the trucks to a closer destination.

The suit claims that’s precisely what Zest had been testing with Walmart over the prior three years.

“Over the course of its relationship with Zest, a large number of Walmart employees had direct access to Zest Labs’ trade secret technology. That technology is described in numerous confidential Zest documents provided to Walmart and in Walmart’s emails and conversations with Zest employees,” the suit states. “Walmart had access to detailed descriptions of the Zest multi-layer solution, architecture, and algorithms for tracking food freshness and managing inventory from farms to stores, including the Zest Fresh platform, applications, software services, and Zest Labs’ related process know-how.”

In February 2017, Talk Business & Politics interviewed Zest Labs about its fresh technology and the work it was doing with retailers looking to reduce shrink. Peter Mehring, CEO of Zest Labs, said then the company spent the past four years testing how its proprietary technology can help raise the bar for fresh food with transparency of the supply chain from the growers through distribution and into retail. After years of testing the fresh technology the company was preparing to launch it at retail on a national scene in the coming months.

The suit claims Walmart used Zest Labs to learn all it could about their technology and then took that knowledge for its own use on the Eden system.

“Walmart’s misappropriation of plaintiffs’ trade secrets was willful and malicious. Walmart has used and continues to use plaintiffs’ trade secrets in conjunction with Walmart’s new Eden platform in breach of contractual agreements with Plaintiffs,” the suit states.

Zest Labs is asking for actual damages, past and future and a reasonable royalty. They also want Walmart to disclose the names of any employees they shared proprietary information with regarding Zest Labs during their three year association and multiple pilots.

Ecoark, founded by former Walmart exec Randy May, said last August it was exploring the possibility of spinning off Zest Labs, but that has not happened. Court records indicate Zest Labs is a subsidiary of Ecoark. Zest Labs is based in San Jose, Calif.