God I hate this logic, it's his own work anything he DOES with it is "fair". Actually, rather than "fair" releasing the code would be "nice" of him but never releasing it would be the actual "fair" choice.
If you or someone else has the skills to make something better than you can put in your own time all the while never releasing that code either and that will still be fair. In the mean time it's HIS time that HE used to make this so whatever he does with it is fair.
It's his work, and by "his" I mean "theirs" since there are two people working on it so either one can do whatever they want.