(Fortune International) -- Francisco Mingorance was on vacation in Spain last winter when he logged on to an Internet webcast and heard French politicians debating how to require Apple Computer to disclose its secret underlying code for iTunes software - a move that would allow millions of music lovers to play downloaded music and video on any device they chose.

"I nearly fell off my chair," says Mingorance, director of public policy in Europe for the Business Software Alliance, whose members include Microsoft, Intel, and Symantec. "France is a country that is so respectful of authors. Giving software free on the Internet? That would be the end of copyright protection."

Mingorance's alarm has subsided slightly, at least for now. More than six months of bitter wrangling among French legislators over Internet rights melted into a summer of torpid heat and World Cup mania.

But like other technology experts, Mingorance says that France's new digital rights law - pushed through the French Parliament on June 30, hours before politicians began their long summer recess - has the potential to spread across the Continent.

Although the law, which still needs to be signed by President Jacques Chirac, makes concessions to the big technology and entertainment companies that lobbied against it (including a section dubbed the "Vivendi Universal (Charts) amendment" that imposes prison sentences and fines on coders of software designed to break media copyrights), it will allow the government to force Apple (Charts) and other companies to disclose their protected code.

Under the law, those requesting underlying code will need to apply to a newly created government body, which will consider each case according to its benefit to the software's owner.

And the law includes a loophole for companies like Apple by giving copyright holders - such as record labels and musicians - the right to say they don't want interoperable systems. The provisions don't give much comfort to France's free-software movement, which fought for the legislation.

Says Alexandre Zapolsky, head of the Association of Open Source Professionals: "This is the death of interoperability." But interoperability - the ability to download music and video to various formats - is far from comatose.

The issue taps into one of Europe's most explosive sentiments: a suspicion that giant American companies dictate terms for the rest of the world. Ironically, that sensitivity helped Apple create its huge early success. In 1984 the company rolled out its Mac computer with a TV commercial showing a hammer smashing a PC. Two decades on, the free-software activists are aiming that message back at Apple.

"It is cast in a David vs. Goliath light. That is why American companies are playing it low key," says Jason Turflinger, managing director of the American Chamber of Commerce in Oslo, who says he feels frustrated by Apple's reluctance to have him lobby on its behalf in the Norwegian capital.

The company could use Turflinger's help. Norway's government has given Apple until Aug. 1 to redraft its terms of service and alter its digital rights management, which blocks the software's use by other systems. If Apple doesn't comply, it could face stiff penalties.

Apple Europe spokesman Alan Hely says only that the company is "looking into" Norway's demands, and he wouldn't comment on the new French law. Denmark and Sweden have said they will follow Norway's lead. Although the three countries comprise only 19 million people, they show how quickly an anti-Apple move could take off elsewhere.

While Sony (Charts), Microsoft (Charts), and other entertainment companies could be affected by new digital-rights-management laws, free-software activists have latched on to Apple to make their point. As Norway's Consumer Council was drafting its complaint, activists were protesting outside U.S. Apple stores and at Paris music retailers.

Can iTunes and others survive the mounting challenges? Not only free-software advocates have their doubts. "Apple is living in a fool's paradise, but then the whole media market is doing that," says Gilles Gravier, chief technology strategist for Sun Microsystems (Charts), who believes that digital-rights management should end.

Gravier says technology companies fail to realize that opening their software could create a boom for online purchases, since millions more people would be able to play downloads, increasingly on their mobile phones. "When records came out, they said it would close concert halls," Gravier notes. "But they are still there."

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