It's not often that patent lawyers are stirred into urgent action, but the other day one phoned me in a breathless state of agitation. The health of Europe's entire technology sector was at stake, he said, and by extension the welfare of the entire continent.

The source of this anxiety was the draft European Directive on the Patentability of Computer-Implemented Inventions, approved by MEPs on 24 September, and the "free-love, open-standard, freeware fanatics" who lobbied hard for last-minute amendments. They have succeeded, he argued, in deploying a hydrogen bomb to crack a nut.

A bit of history might help here. Since 1981 it has been possible to patent a wide variety of software-related inventions in the US that wouldn't be sniffed at by European patent examiners.

To gain a patent in Europe, software inventions have to solve a technical problem by achieving a physical effect. While a new error-correcting algorithm can be patented in its own right in the US, here the algorithm is patentable only as a part of a well-defined storage or transmission system, say.

In the US, if the algorithm proves useful in, perhaps, gene sequencing, then the patent still applies. In the UK, it doesn't.

This mismatch has led to intense lobbying both for and against US-style software patents. Those who want them - large businesses, mostly - have been opposed by programmers and smaller firms, who fear that inadvertent infringements will lead to costly lawsuits, thereby stifling innovation.

The EU has tried to resolve the matter by drafting a directive to amend European rules. And far from adopting US-style patents, the current draft has retreated in the opposite direction.

A new proposed rule states that "production, handling, processing, distribution and publication of information, in whatever form, can never constitute direct or indirect infringement of a patent, even when a technical apparatus is used for that purpose".

If enacted, this provision will remove patent protection from many IT-based inventions that are currently perfectly acceptable.

Worse news awaits makers of new products that combine original software and novel hardware. The draft directive states that "whenever a patent claim names features that imply the use of a computer program, a well-functioning and well-documented reference implementation of such a program shall be published as a part of the description without any restricting licensing terms".

Great news for penguin fanciers, certainly, but less good for a firm like, say, Segway, which spent millions of dollars building its safety-critical embedded software. Under the proposed rules, to gain a European patent Segway would have to give that software away.

Such rules will not only encourage tech sector firms to shift R&D out of Europe, but will also discourage the introduction of new products.

The draft directive is not yet law, and of course there are a further opportunities for it to change. However, some patent lawyers are already lobbying for it to be junked in its entirety.

Based on my admittedly inexpert assessment, that sounds like a good idea. But this is the EU: wisdom may well fail to prevail.