Companies including Nokia and Microsoft claim that European lawmakers are criminalising many legitimate businesses in their efforts to stamp out digital counterfeiting and piracy of products such as music and films.
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They claim that if the law takes the form proposed by the European Commission, the law would discourage technology firms from innovating.
Both the commission and the European parliament both want to make the proposed law broad-ranging, and by doing so both institutions have been accused of being biased towards the owners of copyright, patents, and other forms of intellectual property.
No one questions the main aim of the bill. Everyone agrees that a pan-European law punishing counterfeiters is the only sensible way to deal with counterfeiting rings, which rarely limit themselves to one country.
However, the critics argue that the proposal extends far beyond the murky world of criminals.
Nokia, for example, fears that by covering patents, the directive threatens the economic well-being of innovation-based businesses in Europe.
"It is vitally important that this directive strikes the right balance between protecting the interests of rightholders without unfairly impeding others from competing in the same market," claimed Tim Frain, Nokia's director of intellectual property.
Patent infringement is an everyday risk for innovators, and risk assessment is a business decision, said Frain, adding that if patent infringement were to be made punishable by criminal sanctions, it would act as a strong disincentive for executives.
Introducing such harsh remedies for good faith infringements would present new risks and liabilities for companies conducting bonafide business in Europe, he said.
Microsoft's senior legal counsel, Marie-Therese Huppertz, shares some of Frain's concerns. Questioning whether there should there be the same rules for patent infringements as for counterfeiting, she agreed that criminal sanctions for patent infringers may well stifle innovation.
The argument for excluding patents from the scope of the proposed law appears to have won over Janelly Fourtou, the European parliamentarian responsible for preparing the parliament's position on the proposal.
The issue of patents is complex, Fourtou said. Last month a debate in the European Parliament on a proposal for a law on software patents provoked one of the most bitter and aggressive lobbying efforts the House has ever seen, according to several MEPs.
Fourtou said she did not want the IP enforcement bill to get bogged down in a similar dispute. However, the commission's desire to include patents may still win the day.
While trying to narrow the scope of the bill to exclude patents, Fourtou is, at the same time, seeking to expand its reach in the field of copyright.
The commission's proposal tried to avoid the situation which has occurred in the US, where the record industry has sued individuals who have illegally downloaded music from the internet, including most famously, a 12-year-old girl from New York.
The commission proposal tries to home in on counterfeiting gangs by limiting the suggested penalties to those offenders who steal works for commercial purposes.
Fourtou wants to remove these words from the proposed law.
"Even if you aren't downloading music for profit, you still are having a very negative effect on authors and musicians," she said. "Even a young boy who does it innocently causes an economic counter-effect."
Legal academics in Europe share these companies' concerns about the proposed law on intellectual property enforcement, which is due to be debated in the coming weeks.
William Cornish, a professor at the University of Cambridge, and Josef Drexl, Reto Hilty and Annette Kur from the Max Planck Institute in Germany, said they are worried that EU lawmakers have gone too far in their efforts to protect rightholders.
"Instead of relating only to piracy and counterfeiting, the draft is couched in more general terms," the academics said. They questioned whether there is a need for such a law and, if there is, whether the text proposed by the commission is proportional to the problem it seeks to address.
They also criticised the lawmakers for rushing it through and for listening too closely to lobbyists.
Thomas Vinje, a partner in the Brussels law firm Morrison & Foerster, whose clients include Nokia, shares the concerns expressed by the academics. He said Fourtou's amendments make a bad situation worse. "She is putting a dangerous weapon in the hands of, among others, the big record companies," he added.
Counterfeiting costs the computer industry about €3bn in sales last year, because approximately 35% of software acquired in western Europe last year was pirated, according to US industry lobby group the Business Software Alliance.
The International Federation of Phonographic Industries claims that one in three music CDs sold around the world last year were pirated copies, and that sales of pirate CDs that year were worth $4.6bn.
Paul Meller writes for IDG News Service