I actually would sign that contract if the terms were good. For instance, suppose a company said "we're actually just interested in hiring really smart people and largely letting them pursue good ideas. Just keep us posted on what you're working on, and what business value it might bring. We will pay you a large, stable salary, and we also provide a very substantial share of the profits to the innovator". Under terms like that, I can see how a company would be kind of peeved if an engineer said, oh, my good ideas were the ones I had and worked on at home.

BTW, this is an unusual hypothetical, and not really what you're talking about here. What you're mentioning is the sort of "you're a coder for us, we will give you projects, you will need to complete them, we expect you to work on them 40+ hours a week, and oh, also, we own all other tech related projects that you might happen to do while you are employed by us".

I fully recognize that the #2 is far more common than #1.