Losing my Software Rights?

vintagepc writes: Having written a piece of software as part of my research employment, I now face (and will later face again, with other software I've developed), the issue of intellectual property rights. The legal department stated that if I was paid by the University to produce the software, the University would own all rights to it. This is supposedly black and white, not a gray area.
However, I should point out the following: I was hired as a research student (not directly by the University, and also via a research award (NSERC)),
Furthermore, it turns out that faculty members here, in fact, retain their intellectual rights to any software they write.
At this point, I can still back out, since I have not explicitly agreed to the conditions, but this decision must be made soon.

So, I turn to the Slashdot crowd to ask:
Are they allowed to do this and completely strip my rights to the software?
If anyone has had any similar experiences, then what was the outcome?
Additionally, is this a normal action, or do I have some maneuvering room?