It's not common practice, and it's not ethical, what they're doing. That said, it's more good for you than it is bad. The investor reached out to you. Use this

It's not common practice, and it's not ethical, what they're doing. That said, it's more good for you than it is bad. The investor reached out to you. Use this as an opportunity to get face time. Get him to know you. He wants something from you (probably, not to sue the company and to give them a license on fair terms). Get as much in the way of social currency (introductions to other investors, face time with important people) as you can out of this. But, over all, see it as an opportunity to make friends rather than enemies. The investors, if they're any good at their jobs, aren't going to let someone just steal your idea and claim credit. They're supposed to catch that in due diligence. Your job, at this point, is to be firm in negotiations and get all the social capital you can, but ultimately (unless it's unethical or against what you stand for) to try to make sure that the investors get what they want out of the process, and know you in a positive way in the future. As repulsive as The Wire's Stan Valchek may be, I take from him a choice quote: "kid, careers have been launched on a helluva lot less". You have leverage; use to it get introductions and social proof and to make friends, rather than making enemies.