Well, I haven't had your problem with software.
But when sell items on EBAY, the buyer always pays the price of shipping it back to me and I refund their shipping. I put that in my listing. I've only had one item returned, and they did not complain about this policy since it was on my auction.
As far as selling software (which I have also done), I guarantee it Non-DOA, and state that there are no returns. Mine is tested before I send it, adn if there are any problems, it goes to UPS insurance. The main problem with selling software is what's to keep someone from buying it, and copying it and then returning it saying it doesn't work.
In your case, based on how he's acting, I'd suspect he's done the same thing. The only suggestion I would have for you is to contact Safe Harbour and get tehm involved. You shouldn't have to pay for him shipping it back to you IMO. He's already left negative feedback, so you can only lose a "positive" response to his negative feedback.