A normal employer with a normal-world mindset. This is their competitive advantage and they're keeping it for themselves - even though they didn't (in his reading) buy the original code he wrote.
Sad, but a fact of life if you deal with businesses.
"Employer" is not quite so simple. Organizations are multilayered and complex.
In some cases, your whole department (i.e., bosses and bosses' bosses) could be in open support of this project, but the legal department could shut it down.
Hell, the CEO could be even in support of it, but still be overridden by the legal dept for a bunch of valid reasons.