"What happens when employee #2 makes off with your code and roadmap and marketing data and customer list, moves to Bolivia, and starts selling your stuff world-wide at one-tenth the price?"
Rest of the article here: http://blog.asmartbear.com/unfair-advantages.html
1. use your version to fight for some market share
2. quit
There are others but these seem like the most realistic alternatives to me.
Lawyer up and fight is one other but I don't think it will bring you true resolve (or happiness) whether you win or lose. The true legal situation depends on a lot of factors and you don't give enough information to comment really on that.
Really though you guys need to sign a legal agreement dissolving the partnership and specifying who owns what. Otherwise neither of you can re-use any of the existing IP safely.