AFAIK, here you need an exception written into your contract, saying that your employer won't own stuff you make in your own time. Of course this onl applies to hobby work that's directl applicable to your job -- if you're a garbologist, your employer can't claim your games, or if you're a gamedev your employer can claim your sewing designs...

Let's throw out a very common hypothetical question.

Lets say you are employed and you have been stuck on how to solve a tricky problem in the design at work. Your brilliant solution occurs not during working hours, but while you are at home relaxing.

What happens next? Do you go to your boss and tell him, "I found a solution to the problem, but I found it after hours. I'll sell you the solution for $5000."? Does the company have a legitimate claim (either morally or legally) to that brilliant solution?

Employers often have some right to limit what you do and to take ownership of certain things outside of work hours when they directly relate to your job or the ability to perform your job.

For example, a game studio can legally require as terms of your employment that you do not create or sell any games, either on your own or for another group, without their written permission. You can take up a 'moonlight' job doing something that doesn't compete, or that is unrelated to games, but the closer it comes to matching your day job the increased risk you face. That kind of off-duty job can be not only cause for termination, but can also be cause for a wide range of civil lawsuits. They might include tortious interference, breach of contract, unlawful competition, theft / misappropriation of trade secrets, and anything else lawyers could think of.

We could ask the same question even for something I thought up during work time - I could hold the solution to ransom. But that in turn is just a variation on demanding a pay rise in return for working. I have that right to do that (striking being the explicit option, but perhaps not fixing certain things on a smaller scale), and the employer has the right to offer or refuse the demands.

A bigger problem I think is someone arguing later on, that they have legal ownership of something the company has done, on the grounds that they thought about it at home.

So yes, I agree that some things a reasonable - anything that's submitted to the company for its products/services, as well as other issues such as competing, or conflicts of interests. This doesn't excuse the blanket "we own everything you do" that some contracts try to enforce.

I mean, it's the same as saying to a chef that anything you cook outside of work belongs to the restaurant you work for.

That's stretching it much too far. You would literally die if you couldn't cook for yourself outside of a restaurant job, but there is no physical threat to life if you can't make video games outside of a video game job.

Still, it's a bit barmy to think that if such a programmer wrote a script for his or her partner to manage/edit their personal photo collection, it's a copyright violation because the company claims ownership. No one would die, but it's still a common example that people might reasonably do in their spare time.

I know, in practice no one would know or care in this example, but it does demonstrate how one-sided and overreaching such contracts can be. Also if the contract doesn't restrict itself to code/software (or say, "something that competes with the company"), then you're committing copyright violation to put your photos on Facebook. If it turns out that the company doesn't care about photos going on Facebook, then they should write a contract that actually does say the thing they care about, rather than trying to cover everything. (A restriction on video games for a video game programmer is far more reasonable; but some of these contracts may claim to cover all software or even all intellectual property.)

Still, it's a bit barmy to think that if such a programmer wrote a script for his or her partner to manage/edit their personal photo collection, it's a copyright violation because the company claims ownership.

Straw man argument. This wrongly assumes that invention clauses are always poorly and broadly written. It also wrongly assumes that invention clauses have something to do with "copyright violation."
Invention clauses invariably cover inventions that are within the sphere of the employer's business. A video game employee who has an inventions clause in his employment contract does not have to turn over to his employer a birdhouse that he builds in his spare time with his own tools and materials. Read the contract. Negoatiate.

Bottom line: this is the kind of question only a lawyer in your state can give you a firm answer to.

The good news? Many companies have legal departments that you can ask this sort of thing, and they're ethically bound to give you honest answers. Since they know their companies policies better than anyone and can generally get a copy of your employment contract, they should be able to give you a definite answer.

If it is in your contract then usually it is legal.

I wouldn't be quite so confident, all kinds of crazy stuff goes into contracts that isn't actually enforceable under the laws of the country in which the contract applies. In the UK, common areas are notice periods and non-compete clauses - and also this issue of ownership of work done outside work - our laws stipulate some ground rules covering this stuff to protect you from contracts attempting to pull a fast one.

You have to remember we're talking about John Carmack here, not an average Joe.

In general, higher-ups have contractual clauses (some are non-compete clauses, which come in various shape and form) which can give the company claim to file such a lawsuit. You generally hire these high managers to position your company on a strategic level, which means they have a strong awareness of what's happening in/out of the company, and try to contribute positively to your SWOT to the best of their ability.

If they feel that John Carmack's time hasn't been fully dedicated to that purpose during the period of employment and infringes on such a clause, they have the right to bring it to court. I'm not 100% familiar with the American System of Justice, but I'm going to assume that the burden of the proof will be put on Zenimax and not Oculus / John Carmack.

As per the above, I believe that the "place where the work was executed" is largely irrelevant for this case specifically.

Where I work it's pretty common to have people work on their "toy projects" at home, and everyone knows it. Game designers toying with Unity to try new gameplay ideas, programmers coding their own home engine at home, etc. In a few cases, we had people leave the company to work on their project full time, and then their friends still at the company even write mails to others to fund their kickstarters! Nobody cares.

The thing is, the production value of the typical indie game is orders of magnitudes below that of a triple-A title, and makes less profits by orders of magnitude as well. Unless your game turns out to be the next Angry Birds and you are sitting on top of a multi-millions IP, in that case, the big company will obviously try to get its share of the millions, companies being companies and all that. And even then, I bet a lot would be more interested to get you back to working for them and release the next game under their banner since you obviously know how to make good games. And honestly, in that case, you have already won the jackpot so as far as I'm concerned, this is a good problem to have. But if you have a more modest success, I highly doubt they'll care. They're not patent trolls.

Companies have reasonable reasons to be worried. You pay for someone's training and then he quits and joins the competition. I'm aware of a company that has paid the balance of someone's university, and right after the guy got his grad, he quit. I don't have a lot of love for ZeniMax quite the opposite (I hear it's an horrible place to work at), they basically got their senior software engineer working on a seemingly small project that suddenly became huge with Facebook's investment. Again, companies being companies, it was obvious they would sue.

On the other hand, picture that you're an indie developer working on a game on your time, and then you ask your friend programmer who works at <big game company> to help code something, and then whoops! your friend didn't think of his contract and now <big game company> supposedly owns part of your IP. To you this is nothing short of highway thievery and IP trolling. This is probably how Occulus Rift sees the whole issue. They asked for help, Carmack got interested and gave them suggestions, and now they own part of their IP and technology to Zenimax?

I'M NO LAWYER OR JUDGE, but if I were to decide in that case, I would say that Zenimax is only entitled to what was/would have been given to Carmack by Occulus. Did Occulus offer shares to Carmack for his help? And did Carmack's work contract gives Zenimax the rights on everything he did. It yes to both, then I believe Zenimax would be within its rights in claming shares for Occulus (whether it's moral is another thing), otherwise it is between Carmack and Zenimax to figure out whether there the work contract was violated, and Occulus or Facebook owes nothing to Zenimax. Again, I'M NO LAWYER, just trying to use common sense here... Which is probably futile with US IP laws, come to think about it... In any case, I hope this case goes to court because I'd like to see that kind of work clause challenged in a court of justice.

And speaking of lawyers, you should consult yours if you are working on something you find promising and have serious concerns on whether your employer would be entitled part of your hobby work.