"Legally" (IANAL), the Windows 8 upgrade licence REPLACED his Windows 7 Home Premium licence, and so it does not exist anymore. He now has a full "retail" licence to Windows 8 Pro, and can no longer ever use the Windows 7 Home Premium he upgraded from (since it's legally been replaced by Windows 8).
Unlike his OEM Window 7 Home Premium, the his now-full Windows 8 licence will allow it to be moved to another system. But this doesn't free up his Windows 7 Home Premium licence, since it's been replaced by his Windows 8 upgrade, and doesn't exist anymore.
From "MICROSOFT SOFTWARE LICENSE AGREEMENT -- WINDOWS 8 PRO":
What about upgrading the software? The software covered by this
agreement is an upgrade to your existing operating system software, so
the upgrade replaces the original software that you are upgrading. You
do not retain any rights to the original software after you have
upgraded and you may not continue to use it or transfer it in any way.
You can get the license agreements for MS software here:
To keep it legit, he should return his unwanted copy of Windows 8 to MS, cancelling that licence agreement so he can go back to Windows 7 Home. You should then buy Windows 8 yourself -- if your friend still really wants to give you Windows 8, he can just hand you the refund he gets from MS so you can go buy your own. ;)