The writers of the code do own it. Clearly, a team was formed for the purposes of submitting an entry into a competition. Since they intentionally commingled their efforts, they own it as a partnership rather than as individuals.
Each one of them owns the whole code. If they want to do anything with it outside the existing nine, they need all nine signatures on the agreement. For practical purposes, that means Billy does not have much leverage. He needs to get all 8 of his partners to cooperate, and none of them need him in the slightest.
If he chose to block any partnership agreement, they could just reconvene as a partnership-of-8, and spend another weekend re-creating a better codebase from scratch. He would be left with nothing. The reasons they would not do that are because the idea itself is rather lame and unoriginal, they could probably come up with something better on their own, and having proved themselves as a team, they might want to try something new anyway.
I agree in a normal or typical context, but the 0.4% thing muddies the water a bit and it makes me wonder if Bobby is telling the whole story.
The 0.4% proposal that was agreed on implies to me that they may have known that Billy was interested in turning this into a company and that before-hand they'd agree that each member has a 0.4% stake in whatever venture comes out of the work they do that weekend regardless of who uses it.
Why else strike such an agreement? Without this proposal, naturally every member would have a 100% / n share if they formed a company out of the team, and no single member could, as you describe it in your post, simply appropriate all the work without consent of the rest of the team. The 0.4% suggests that one member wanted to start a team before-hand, the rest didn't, but that this would be their compensation for the weekend of work regardless of who ended up using the weekend's resulting work.
Again this is all just speculation, but I'm having a hard time understanding a potential rationale for the 0.4% proposal, which was a developer's proposal of OP's friend, not Billy's idea to do a bait and switch or exploit the devs.
Each one of them owns the whole code. If they want to do anything with it outside the existing nine, they need all nine signatures on the agreement. For practical purposes, that means Billy does not have much leverage. He needs to get all 8 of his partners to cooperate, and none of them need him in the slightest.
If he chose to block any partnership agreement, they could just reconvene as a partnership-of-8, and spend another weekend re-creating a better codebase from scratch. He would be left with nothing. The reasons they would not do that are because the idea itself is rather lame and unoriginal, they could probably come up with something better on their own, and having proved themselves as a team, they might want to try something new anyway.