Actually, I'm pretty sure if you own a copy of a game then you're allowed to have a 'backup' of it. If you (or, in this case, your friend) physically own a copy that you paid for, then it's ok to have a backup of it. Not sure whether we start getting into murky territory if the backup copy becomes the primarily used one though, but it might be all the same since you still paid for the game ($10 extra if you play the PC version primarily). I'm not sure if things have changed with the advent of downloadable games being so prevalent though. I think that's just how it was before the internet became widespread on consoles.
Note: I am not a lawyer. This is what I was told by a close friend and fellow gamer who is halfway through law school, so take it with a grain of salt.