> If the code wasn't properly licensed to begin with, then he has no legal rights > to it.
No actually that is incorrect. If I steal some source code from someone and modify it. Then while I don't have any rights to the code I stole, I do have rights over the code that I wrote (as long as that code is copyrightable, not all code is). The original owner can't then take ownership of it, or I could sue them. AFAIK this has been tested in court before.