He grants the rights to go commercial with their code, but reserves the right to call us names for doing so. Still sounds like a good deal to me.

Name-calling rights are far too often forgotten in modern day contracts, I'm afraid...

I think that's one of the barriers that prevents code from being released: People (like myself) worried that others would take that code and compete with you.

Than use a different license that explicitly forbids that. Or force them to get your permission first. Using an open-source license is not mandatory