I don't know if there's a "standard" answer; this seems like a pretty unusual situation. I think you should start by asking yourselves how much of a difference

I don't know if there's a "standard" answer; this seems like a pretty unusual situation. I think you should start by asking yourselves how much of a difference it will make to your chances of success if you reach agreement vs. if he walks away. Don't underestimate the value of an early revenue stream -- if his product can be launched quickly and brings in some money, even if its ultimate potential is small, it could be of tremendous help in supporting you while you work on your more ambitious project.