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The proposed law, which would replace 15 different regulations in the 15 countries within the European Union, would only allow patents for software applications of a technical nature - that is, software that runs a mechanical device or changes how a mechanical device works.
The law would not permit patents on business methods. Examples of the kinds of software that could be patented would include software that runs an X-ray machine, or that makes a PC run faster.
The US and Japan allow patents on a much wider range of software, and they both permit patents on business methods. Business methods include innovations such as one-click purchasing, for which online retailer Amazon.com received a patent in the US in 1999.
Amazon used the patent to get an injunction against use of a similar purchasing feature by a rival, Barnes & Noble, but that injunction was lifted by an appeals court this year pending a trial.
"The Commission thinks that allowing a patent for the 'one-click' purchasing technique goes too far in restricting trade," said Frits Bolkestein, commissioner in charge of the internal EU market.
He described the Commission's proposal as a compromise between the stance taken in the US and the position of the open source software community, which opposes all patents on software products. "The US approach is too restrictive, while the [open source] approach is too liberal," Bolkestein said.
In anticipation of a hostile reaction, he added: "We will take complaints from the US on the chin."
Criticism is also expected from within Europe, not least from the European Patent Office, based in Munich. "The EPO has of late taken a more restrictive approach, issuing patents to software applications themselves," Bolkestein said. "The member states of the EU are waiting eagerly for the Commission's position."
The EPO can register patents for every country in the European Union. However, the system is expensive, because applicants have to pay each country's national patent office to exercise their protection in that country.
The EPO eventually will have to bow to the directive once it is transposed, as expected, into national law in the member states, but even then there could be some confusion, said Ari Laakkonen, a lawyer with the UK law firm Linklaters & Alliance.
The European Parliament and national government ministers will debate the proposed law. Under the normal time frame, if approved, it would reach the national statute books in about 18 months.