updated 7/6/2005 8:44:29 AM ET 2005-07-06T12:44:29

The European Parliament on Wednesday rejected a proposed law to create a single way of patenting software across the European Union, a blow to big companies who had pushed hard for its adoption.

The so-called software patent directive, rejected by a 648-14 vote with 18 abstentions, would have given companies EU-wide patent protection for computerized inventions ranging from programs for complex CAT scanners to ABS car-brake systems.  The protection would also have extended to computer programs when the software is used in the context of realizing inventions.

But lawmakers said the measure would stifle enterprise and did not promote innovation, and that human knowledge can't be patented.  The move kills the legislation since the EU head office, which had drafted it, does not plan to set forth a new version.

"Patents will continue to be handled by national patent offices ... as before, which means different interpretations as to what is patentable, without any judiciary control by the European Court of Justice," said EU External Relations Commissioner Benita Ferrero-Waldner, representing the EU head office at the vote.

The bill would have stopped short of the U.S. system that allows patenting of business methods or computer programs such as Amazon.com Inc.'s "one-click" shopping technique, which gives consumers a quick system to buy goods on its Web site.

Wednesday's vote was preceded by weeks of massive lobbying between big businesses and free software believers.

Companies such as Nokia Corp. and Siemens AG fought hard for adoption of the bill, saying patent protection would give them incentives to invest in research and development.

Open-source advocates campaigned against it, saying that individuals and small businesses could be bankrupted by expensive legal battles with software giants over fuzzy patent law.

Many members of the European Parliament feared the bill would limit the development of new software in Europe, especially by small businesses. They also wanted more clarity on the criteria for what types of software could and could not be patented.

"You don't patent a mathematical formula, for software is merely a connection of a mathematical formula," said Michel Rocard, the former French Prime Minister who was in charge of steering the parliament debate.

Rocard, a deputy for the Socialist group, said patents worth tens of billions of dollars (euros) were potentially at stake and, in terms of impact on businesses, the bill was the most important piece of legislation the assembly has ever dealt with.

"All the political groups took the same opinion for different reasons," he said.  "There is a simple meaning behind this: We are split almost half and half on the substance."

Some 178 amendments to the bill were tabled by lawmakers before the vote.  In the end parliament decided to vote down the law, fearing the amendments would dilute it and make it an inadequate compromise.

"It was a mess.  Better no directive than a bad directive," said Tony Robinson, spokesman for the Socialists.

EICTA, a group representing 10,000 companies including giants such as Nokia and Alcatel SA which had been lobbying for the bill, said the decision to scrap it was wise, given the large number of amendments that threatened to severely narrow the scope of the legislation.

CompTIA, representing small- and medium-sized information technology companies, echoed this view. "Conflicting views have confused the issue and made it difficult for the parliament to reach a clear and balanced decision that would adequately support innovation."

The European Commission has made the patent law an essential part of its economic reform.

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