I would suggest following what /u/CornMuscles529 suggested and reviewing the thread /u/nipplesweaters created. I learned a few things myself.

I would reevaluate the scope of the project they are asking of you. Can you ask for more clarification and how big this task is? If it does seem like something that is beyond the scope of the interview (i.e., looking for free consulting), be ready to provide the three options (refuse, charge them, protect IP). If this task simply requires a demonstration of your skills, then I would relax and follow through.

Good luck :)