A complex and long-standing legal dispute between Walmart Inc. and Zest Labs Inc. recently took a dramatic turn. Zest Labs, a company specializing in supply-chain technologies, initially sued Walmart in 2018, accusing the retail giant of mishandling its trade secrets.
The Case that Started It All
Zest had developed technology to improve the way fresh produce and meats are managed from farm to store, ensuring that the items are kept fresh for customers. According to Zest, Walmart was supposed to handle any Zest-related patents with care, sharing all relevant information during the court’s discovery process.
At the heart of this case is a critical patent application tied to Zest’s technology. Zest claimed Walmart failed to reveal all of its patent activities related to Zest’s technology, an act that Zest argues damaged its business. In 2021, the case reached a major milestone when a jury awarded Zest Labs a substantial $115 million verdict, deciding that Walmart had, in fact, misused Zest’s trade secrets. But this initial victory for Zest was short-lived, as the verdict was later overturned. Judge James Moody Jr. ruled that certain evidence brought forward by Walmart suggested Zest might have been aware of some patent developments and failed to act to protect its information.
Alleged Concealed Evidence and Ongoing Arguments
The twist in the case came when Zest Labs requested new sanctions against the retail giant, accusing it and its former legal advisors, Skadden Arps Slate Meagher & Flom LLP, of hiding additional evidence. According to Zest’s new filing in U.S. District Court in Little Rock, the company believes crucial details were withheld from the court and Zest, which would have strengthened its case in the first trial. Specifically, Zest discovered two more patent applications, which it claims were not disclosed during the court’s discovery phase. Zest insists these hidden patents involved their own supply-chain technology and contained references to Zest more than 400 times.
These newly surfaced patents are significant because Zest believes they provide additional proof that its technology was allegedly misused, even if the initial patent was made public. Zest argued that the company knew these additional patents would be valuable in the market, yet did not inform Zest about them during the trial.
In response, the legal team asserted that all necessary information had been shared, stating that Zest should have taken better measures to prevent the Patent Office from making their technology public. They also countered that Zest had been aware of the patent in question but had taken no action to prevent its publication. According to them, it was only after the jury’s 2021 verdict that they discovered, through billing records of Zest’s own attorneys, that Zest had known about this patent application. Judge Moody agreed that the outcome might have been different if all the information had been considered. Thus, he set aside the $115 million verdict and ordered a new trial, which is now scheduled for January 21.
Seeking Sanctions and the Road Ahead
With the recent discovery of the additional patent applications, Zest’s legal team has requested that Judge Moody take action against Walmart and prevent them from arguing that Zest should have taken measures to stop the patents from becoming public. According to Zest’s lawyers, Walmart’s previous actions to disclose only one patent while hiding two others intended for continued development was an intentional strategy to weaken Zest’s position.
To support its latest claims, Zest has assembled a legal team from several high-profile law firms. The firm Bartko LLP of San Francisco, among others, is now representing Zest, emphasizing in their filing that Walmart’s patent filings extensively reference Zest’s work, indicating the importance of Zest’s technology in Walmart’s developments. Zest argues that Walmart’s alleged concealment harmed their position in the initial trial by keeping them in the dark about other patent applications that would eventually make Zest’s trade secrets public, whether or not Walmart formally published them.
On Walmart’s side, they continue to maintain that Zest’s actions, or lack thereof, weakened its own claims. Walmart alleges that Zest did not take proper steps to ensure the secrecy of their patent and that Zest is now using these hidden patents as a “distraction” from what Walmart describes as misleading statements that Zest made to the court. According to Walmart’s statement, Judge Moody found certain statements made by Zest to be misleading, which was a contributing factor in overturning the initial jury’s verdict. Walmart emphasized in their response that Zest’s current actions are an attempt to shift focus away from these initial findings, which called into question the accuracy of Zest’s original statements to the court.
As the January retrial approaches, Zest has requested that Judge Moody permit targeted discovery related to the hidden patents, which could mean additional evidence might be reviewed before the new trial date.
