The three-year struggle to establish common rules for patenting software-related inventions in the European Union ended in failure on Wednesday, after a huge majority in the European Parliament rejected the controversial draft law.

The move was met with relief by most companies in the technology industry, many of which had feared that the Parliament might adopt a regime that was either too restrictive on patents, or so generous that it would curb the ability of smaller companies to innovate.

However, the European Commission warned that the lack of a coherent European approach to patenting software inventions could hurt the competitiveness of the Union's technology companies. ?It means fragmentation, it means 25 different systems competing in one way or the other,? said a spokesman.

The Commission had proposed the directive three years ago in an attempt to harmonise the Union's different national approaches to patenting inventions that rely on software. Brussels' intention was to simply codify the existing practice of national patent offices and the European Patent Office in Munich, which has been particularly generous in granting patents for software-related inventions.

However, the directive quickly fell hostage to the furious debate over whether inventions that rely on software - let alone pure software such as Microsoft's Windows operating system - should be patentable at all. Many members of the European Parliament felt that the directive should endorse a restrictive approach to patents, while others were swayed by the arguments of big technology groups which insisted that patents were good for innovation and competitiveness. Unable to find a balance between these two views, MEPs on Wednesday voted by 648 to 14 to reject the directive altogether. Josep Borrell, president of the parliament, said the rejection was the most decisive majority vote in the history of the chamber.

Lawyers said the move would have little impact on companies seeking patent protection for their inventions, though they added the EU had missed an opportunity to impose a common framework across the 25 member states.

Julian Potter, a patent attorney and partner at Mintz Levin in London, said: ?Patents for software have been granted in Europe for decades. The European Patent Office alone has granted over 30,000 patents in this area. That can now continue and the important message today is that patents are still available for software.?

Rudy Provoost, the chief executive of Philips Consumer Electronics, said: ?This result means that our innovation and world-leading products will continue to benefit from patents in the face of growing competition from China and elsewhere.?

A spokesman for Ericsson, the Swedish technology group, said: ?The rejection of the directive means nothing will change. We will still apply for patents the same way we have done previously.? He added that some amendments proposed by the Parliament would have removed patent protection for ?almost anything we do?.

The opponents of software patents, which included many small IT companies, also voiced relief. However, in their case the sentiment reflected earlier fears that the directive could have enshrined a generous patent system in EU law.

Michael Azoff, senior research analyst with Butler Group, the IT research and advisory organisation, said such a directive would have brought in US-style patent legislation and damaged innovation. ?The US model of software patents, driven as it is by opportunism, represents a serious threat to innovation. There are no economic advantages to be gained through software patents, only a greater power vested in companies that can afford to battle daily in courts, supported by teams of patent lawyers,? he said.

Chris Thomas, a Brussels-based partner at Lovells, the law firm, struck a similar note, saying: ?Before you impose a harmonised system on Europe you must be sure that patent offices will be able to provide a rigorous and comprehensive review of whether claimed inventions are actually new. The US experience shows that this is extremely difficult.?

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