It would take less effort, and offer far greater chances of eventual success, for him to simply pick something else to work on and execute on that.
It's just business.
This is why partners should incorporate and come up with a mechanism for handling acrimonious departure before getting to work. A classic response to this problem is the shotgun clause.
If great companies were built by those exerting the least effort we would live in a very different world today.
The early histories of many successful SV companies are peppered with a sour business deal or two. The winners are those that hung on and fought. Did Gates walk away when when Jobs discovered that he was building GUIs? Who walked away from Facebook? Zuckerberg or the other guys? You know the twins...or "those other people" whoever they were. You get the point. Exactly, its just businesses.
I don't see the issue here as being the choice of the easiest road, but of the road with the least to lose. There is definitely a lawsuit here if he decides to continue with the product and use the code he created, leading to quite a few legal fees. If he drops it and moves on to another product he is guaranteed not to lose any more money on this project.
If he had a business, instead of "99% complete and ready to launch", you might think about offering him more optimistic advice. Diving headfirst into the drama swamps with no users up front seems like a bad business call.
Well, there's definitely a lawsuit if he uses the code and succeeds. For a Facebook level of success, well, that's just a cost of doing business. A moderate level of success will probably leave only the lawyers as winners.
It's just business.
This is why partners should incorporate and come up with a mechanism for handling acrimonious departure before getting to work. A classic response to this problem is the shotgun clause.