It seems to be a common misconception that authoritarian, fascist methods to prevent crime don't work. They do. They always worked, they always will. The problem is that it takes away the citizens' privacy as well. If the only argument needed for increased surveillance is to deter crime, then we've essentially doomed ourselves into a society of surveillance, because it always works. Lack of privacy, even in public houses, needs to be seen as problem, not as something that can endlessly be given up in the name of security. Freedom and democracy always were and always will be unpredictable, that's what's so cool about them. To hell with the CCTV cameras. Of course they work to deter crime, the problem is that they also work to control the population, and that's a real problem that needs to be considered as well, not simply ignored.

You might be able to convince them that it's actually in their own interest that you contribute code back to the project, as it's still BSD and they can still use it. In other words, it seems like they don't want anyone to have the improvements that you would otherwise make, even if they don't want to pay for it. A lot of companies have such clauses simply because they don't bother to think about it, and they're compelled to be as mean as possible, since that's somehow supposed to be more grownup behavior. Usually though, those with the most cynical view of open-source software development as competition, even when it suits themselves, tend to know absolutely nothing about it. Use that.