Trade secrets remain a primary source of competitive advantage in technology, manufacturing, and retail. The confidential know‑how often reflects years of investment and iteration. Loss of secrecy erodes pricing power and can shorten product life cycles. Litigation becomes the last resort when voluntary protection fails. The 2025 verdict against Walmart shows that juries still view deliberate misuse as serious corporate misconduct.
The following analysis reviews the dispute between Zest Labs and Walmart, the governing law, and the lessons for managers and counsel.
Please note this blog post should be used for learning and illustrative purposes. It is not a substitute for consultation with an attorney with expertise in this area. If you have questions about a specific legal issue, we always recommend that you consult an attorney to discuss the particulars of your case.
Executive Summary
An Arkansas federal jury ruled on 13 May 2025 that Walmart misappropriated confidential technology developed by Zest Labs. The award totaled $222 million. The sum included $72.7 million in compensatory damages and $150 million in punitive damages. The decision came after a second trial. The first trial ended in 2021 with a lower award that the court later set aside.
The jury found willful conduct. That finding triggered the punitive damages. The panel accepted evidence that Walmart used Zest Labs’ data fields, algorithms, and workflow diagrams. The court applied both the federal Defend Trade Secrets Act and the Arkansas Trade Secrets Act.
The verdict highlights three points. First, plaintiffs can secure large awards if they document secrecy measures and economic value. Second, juries punish deliberate copying even when the defendant is a major employer. Third, businesses must keep clear records that show independent development when they handle external technology.
The Dispute
Zest Labs created “Zest Fresh,” a platform that predicts produce shelf life with sensor data and machine‑learning models. The company entered discussions with Walmart in 2017. Both sides signed a non‑disclosure agreement. The agreement limited Walmart’s use of the shared material to evaluation.
During demonstrations Zest Labs disclosed the structure of its data tables, the logic behind its prediction algorithm, and proprietary performance metrics. Walmart later launched “Eden,” an internal system that used temperature sensors and statistical models to grade produce. Zest Labs claimed Eden copied core concepts it had revealed.
At trial Zest Labs presented side‑by‑side comparisons of code snippets, database schemas, and graphical dashboards. The plaintiff argued that Walmart could not have produced near‑identical outputs in the time between the meetings and Eden’s debut without access to Zest Labs’ work product. Walmart denied copying and pointed to public sources on produce spoilage. The jury accepted the plaintiff’s narrative.
Procedural History
Zest Labs filed its complaint in the Eastern District of Arkansas in 2018. Discovery lasted more than two years. The first trial concluded in July 2021 with a verdict of $115 million. After judgment Zest Labs learned of additional Walmart patents that cited elements of the Eden system. The plaintiff argued that the patents should have been disclosed earlier.
The court agreed that the omission prejudiced the first jury. It granted a new trial under Federal Rule of Civil Procedure 59. The second trial opened in April 2025 and ended in May 2025. The same judge presided. Both parties used a larger expert record. The second jury assessed higher compensatory damages and added punitive damages based on new evidence of intent.
Post‑trial motions are pending. Walmart has stated it will appeal to the Eighth Circuit. The district court has entered a permanent injunction that bars Walmart from using the disputed software modules for five years unless it negotiates a license.
Legal Framework
The Defend Trade Secrets Act of 2016 provides a federal cause of action for trade secret misappropriation. A trade secret must derive independent economic value from being unknown and must be subject to reasonable secrecy measures. The Arkansas Trade Secrets Act mirrors those elements. Plaintiffs often plead both statutes.
Misappropriation covers acquisition by improper means or use of a secret without consent. Willfulness requires proof that the defendant knew the information was protected and intended to act in disregard of that protection. Punitive damages can reach twice the compensatory award under both statutes when willfulness is present.
The plaintiff must show reasonable efforts to maintain secrecy. Courts look for NDAs, access controls, labeling, and employee training. Zest Labs produced signed NDAs, version‑control logs, and password policies. The evidence satisfied the requirement despite the eventual leak.
Evidence of Willfulness
Zest Labs introduced internal Walmart emails that referenced specific slide numbers from the 2017 meetings. Engineers discussed how adopting Zest Labs’ “dynamic aging factor” could shorten development. A project timeline projected completion in one year rather than the earlier forecast of three.
Source‑code comparison showed identical variable names and threshold values. Expert testimony explained that convergence on such values usually requires multiple training cycles. The short interval between the meetings and Eden’s prototype suggested transfer rather than independent discovery.
The jury also saw Walmart patent drafts that listed Zest Labs’ public white paper and private presentation as prior art. Walmart argued that citation showed legitimate inspiration, not theft. The panel concluded that the degree of overlap and the NDA context pointed to deliberate use.
Damages Analysis
Compensatory damages sought to restore Zest Labs to the position it would have held. The amount reflected lost licensing fees and diminished market share with growers. An expert calculated the present value of royalty streams Zest Labs could have earned from Walmart or competitors.
The court allowed punitive damages after the willfulness finding. Punitive damages punish the wrongdoer and deter similar conduct. The ratio of punitive to compensatory damages was slightly more than two to one. The ratio aligns with Supreme Court guidance that single‑digit multipliers pass constitutional scrutiny in most cases.
The final award of $222 million approaches Zest Labs’ total investment in R&D over a decade. The amount signals that trade secret cases can generate awards comparable to patent infringement suits. Businesses should factor that risk into project budgets and insurance coverage.
Business Implications
Large enterprises often pilot new tools with smaller vendors. Confidentiality agreements facilitate open exchanges but create exposure if governance fails. The Walmart case demonstrates that internal processes may break under pressure to deliver rapid results.
Senior management must set strict barriers between evaluation teams and production teams. Clean‑room protocols limit cross‑pollination. Independent developers rely only on public sources and document each step. The record becomes key evidence if litigation arises.
Boards should receive regular reports on trade secret compliance. Risk managers can benchmark incident frequency and training hours. A decline in metrics may flag cultural drift toward lax confidentiality practices.
Core Protection Measures
Effective protection starts with a full inventory of proprietary information. Firms should classify each item by sensitivity and business value. Higher classifications trigger tighter controls. Periodic reviews update the inventory as products evolve.
Access control restricts sensitive files to employees with a defined need. Network segmentation, multi‑factor authentication, and activity logging provide technical safeguards. Physical measures include secure labs, visitor badges, and locked cabinets.
Contractual controls bind employees, contractors, and partners. NDAs define scope, duration, and permitted use. Employment agreements reinforce post‑exit obligations. Supply‑chain contracts extend coverage to third‑party vendors.
Training programs embed confidentiality culture. Orientation sessions explain policy and legal consequences. Refresher courses use case studies such as the Walmart verdict to maintain relevance. Exit interviews remind departing staff of continuing duties.
Continuous monitoring detects anomalies. Security systems flag bulk downloads, off‑hours access, or unusual email attachments. An incident‑response plan assigns roles, sets communication channels, and outlines steps to preserve evidence. Annual drills test readiness.
Litigation Trends
Recent verdicts show juries willing to award high damages when evidence of intent is strong. Courts remain cautious about speculative calculations but defer to detailed expert models. Appeals rarely disturb fact findings on willfulness.
Remote work increases exposure. Employees access data from home networks that may lack enterprise‑grade security. Personal devices blur boundaries between work and private storage. Firms should enforce virtual private networks and remote‑wipe features.
Advances in artificial intelligence lower the cost of reverse engineering. Generative models can infer proprietary logic from limited outputs. Companies may need to revisit what information they disclose even under NDA. The balance between collaboration and secrecy grows harder to manage.
Action Points for Counsel
Counsel should audit existing confidentiality frameworks. The audit checks document labeling, version control, and NDA templates. Gaps become action items for management. The process repeats annually.
When clients plan to receive external technology, counsel drafts split‑team protocols. One team evaluates the solution. A separate team develops internal products using only public resources. Detailed minutes record every interaction.
If a breach is suspected, counsel initiates a rapid response. Steps include forensics imaging, custodian interviews, and preservation notices. Early containment can reduce damages and improve settlement leverage. Documenting independent creation from project inception strengthens defense arguments.
Conclusion
The Zest Labs verdict confirms that trade secret misappropriation carries severe financial consequences. Protective measures require consistent attention and clear documentation. Businesses that embed confidentiality controls into daily operations reduce both strategic loss and litigation risk. Counsel plays a central role in designing frameworks that withstand judicial scrutiny.
The outcome serves as a cautionary note. Agreements alone do not prevent misuse. Effective governance, disciplined development, and continuous monitoring complete the protection cycle. In a data‑driven economy the cost of failure continues to rise.
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Further Reading
- Walmart to pay tech company $222M over trade secret misappropriation, https://www.grocerydive.com/news/walmart-222-million-Zest-labs-lawsuit-court-ruling-trade-secret-misappropriation/748221/
- Top Strategies to Safeguard Tech Trade Secrets | Insight – Baker McKenzie, https://www.bakermckenzie.com/en/insight/publications/2025/04/top-strategies-to-safeguard-tech-trade-secrets
- Trade Secrets 2025 | Global Practice Guides – Chambers and Partners, https://practiceguides.chambers.com/practice-guides/trade-secrets-2025
- On Behalf of Agri-Tech Startup Zest Labs, Inc., Bartko Pavia’s Patrick M. Ryan Obtains $222 Million Jury Verdict Against Walmart – Business Wire, https://www.businesswire.com/news/home/20250514194280/en/On-Behalf-of-Agri-Tech-Startup-Zest-Labs-Inc.-Bartko-Pavias-Patrick-M.-Ryan-Obtains-%24222-Million-Jury-Verdict-Against-Walmart
- 7 Steps to Protecting Your Trade Secrets – USPTO, https://www.uspto.gov/sites/default/files/documents/CRS-LA-OBrien-trade-secrets.pdf