Forthcoming
Aggregated Cross-Portfolio Information as Misappropriation: A New Legal Framework for Regulating Competitive Harm in Venture Capital
M. Mehdi Ali
Forthcoming, University of Miami Business Law Review
Abstract. This Article develops a novel legal framework for addressing how venture capital firms accumulate and risk misappropriating aggregated cross-portfolio information—confidential data from multiple startups synthesized to generate market insights and predictive modeling tools that confer competitive and informational advantages. It argues that misappropriation occurs when venture capital firms leverage these synthesized insights to make investment decisions or provide strategic guidance that harms the very companies that disclosed the underlying confidential information. The Article contends that current legal frameworks (contract, fiduciary, and trade secret law) are inadequate to address such misappropriation, which constitutes a unique and insufficiently recognized form of competitive harm. To address this regulatory gap, the Article proposes five key reforms: mandating disclosure of portfolio conflicts before accessing confidential information, establishing heightened “information fiduciary” standards for VCs, creating a rebuttable presumption of information influence when venture capital firms make decisions benefiting one portfolio company over another, imposing information concentration thresholds that limit cross-portfolio information accumulation, and implementing sliding-scale fiduciary obligations that intensify as information advantages accumulate.