Thanks to everyone for their insightful and helpful replies. They've all helped me realize that my opinions on the matter weren't out of line.

Please note that I wasn't soliciting legal advice; I agree it would have been silly for me to do so, as this is not a legal forum. I was merely conveying an experience I'm having and asking what you would do if you made the same mistake I did. I know that a lawyer is necessary, but I stupidly overlooked that standard practice because the other party is a friend. To me, it felt kind of like a prenupital agreement where each party says "till death do us part" ... but just in case... please sign here.

This experience has made me realize that contracts are necessary for everything. I hope that everyone who comes across this thread considers this need carefully before foregoing it.

And if my friend happens to find this thread as well, I would hope that s/he would just take it for what it is... a request for the opinions of peers.

As an update, after several emails today, we've decided to determine licensing in addition to having a formal contract signed drawn up before any more work is done. We've expressed our concerns, they've expressed theirs, and it seems like we're on our way to an amicable and mutually beneficial relationship.

Again, thanks for your help.