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Think person A has a great software business idea. He also knows software programming and converts his idea to a mobile application. Then he needs to raise some money to launch the application, do advertisement, hiring staffs and buying stuffs. Then he searches through the internet and finds some venture capitals, angel investors, etc. and sending a pitch and demo from his application to encourage them making a deal and investment on his idea/application/business.

But person B who is one of these investors who received this email says "Why should I invest a lot of money and just get 10-20% equity? I can call Bob who is a computer software engineer and ask him to write a similar application for me, or even better than that! So I will have 100% of this company not only 10%!".

Is it possible to prevent such a thing to happen?

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  • a related question is law.stackexchange.com/questions/11376/… some of the answers three could also apply here.
    – David Siegel
    Commented Sep 20, 2021 at 19:26
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    Except for "patent", which is probably in itself to expensive and/or complicated for an individual to apply for, neither of those really apply, I think. Copyright doesn't apply to an idea (if Bob is writing an app from scratch that does the same, copyright is not involved). And trademark applies to the name of the App or your business, but not the idea either.
    – PMF
    Commented Sep 20, 2021 at 19:33
  • a "trade secret" is quite different from a "trademark". See my answer to this question.
    – David Siegel
    Commented Sep 20, 2021 at 19:42

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The inventor or would-be developer can require potential investors to sign a non-disclosure agreement (NDA) before revealing the details of the idea.

In an initial letter a statement such as "This idea is being disclosed in confidence to enable4 you to consider if you wish to invest in the project." That would put the investor on notice, and if the investor discloses it to another or makes use of the idea in a competitive project, there may be grounds for a suit for breach of confidence.

If reasonable precautions are taken to disclose the information only to those under a duty of confidence, and to protected it from unauthorized disclosure, it may be protected as a trade secret, and any evasion of those precautions or breach of confidence may give grounds for a lawsuit. In the US the Uniform Trade Secret Act has been adopted by almost every state. In other jurisdictions there are other similar laws.

As stated in the Wikipedia article

A trade secret is information that

  • is not generally known to the public;
  • confers economic benefit on its holder because the information is not publicly known; and
  • where the holder makes reasonable efforts to maintain its secrecy.
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  • Professional VCs will never sign an NDA. See medium.com/venture-capital-research/…. If they like your business and send you to a technical expert for tech validation the expert will sign an NDA to get the nitty gritty. You also walk in with a talented complete team that is non-trivial to reproduce.
    – George White
    Commented Sep 20, 2021 at 22:36

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