A federal appeals court on Thursday revived its decision to uphold Myriad Genetics's patents on two genes linked to breast and ovarian cancer, after the U.S. Supreme Court told it to take another look at the hotly contested case.

A 2-1 panel of the U.S. Federal Circuit Court of Appeals in Washington, D.C. upheld the biotechnology company's right to patent "isolated" DNA molecules, known as BRCA1 and BRCA2, while denying its effort to patent methods directed to "comparing" or "analyzing" DNA sequences.

"Everything and everyone comes from nature, following its laws," Circuit Judge Alan Lourie wrote for the court majority. "But the compositions here are not natural products. They are the products of man, albeit following, as all materials do, laws of nature."

Thursday's decision in the ethically charged litigation came five months after the U.S. Supreme Court, in a case involving a blood test developed by Prometheus Laboratories, unanimously ruled that companies could not patent observations about natural phenomena.

A week later, the Supreme Court set aside the Federal Circuit's July 2011 decision favoring Myriad , and directed that court to review the case again in light of the Prometheus ruling.

Myriad's patenting effort has drawn opposition from groups such as the American Civil Liberties Union and the Association for Molecular Pathology.

Opponents have argued that patenting human DNA is immoral, unethical and impedes genetic research.

But the appeals court accepted the argument of Myriad supporters that denying patent protection could stifle innovation by the Salt Lake City-based company and others.

"Patents encourage innovation and even encourage inventing around; we must be careful not to rope off far-reaching areas of patent eligibility," Lourie wrote.

Critics disappointed

In upholding Myriad's main patent claims, the Federal Circuit again reversed much of a 2010 ruling by U.S. District Judge Robert Sweet in Manhattan.

"We have viewed this as the most important (part of the) decision for Myriad and therefore view the appeals court reversal as a clear positive," Cowen and Co analyst Doug Schenkel wrote. He rates Myriad "outperform."

Roughly 20 nonprofit groups, medical organizations, doctors and individuals challenged Myriad's patent claims, and it is unclear whether an appeal is planned.

Thursday's "extremely disappointing" decision "prevents doctors and scientists from exchanging their ideas and research freely," ACLU lawyer Chris Hansen said in a statement. "Human DNA is a natural entity like air or water. It does not belong to any one company."

Gregory Castanias, a partner at Jones Day representing Myriad, said in a phone interview: "We're very pleased that the panel has continued to recognize that isolated DNA molecules are products of human ingenuity, and are thus eligible for patent protection."

Supporters of Myriad have also said denying patent protection could slow advances in personalized medicine, which uses genetic tests to identify specific therapies for individual patients.

Circuit Judge William Bryson dissented from Thursday's decision, saying it "will likely have broad consequences," and perhaps pre-empt methods for whole-genome sequencing.

The case is Association for Molecular Pathology et al v. U.S. Patent and Trademark Office et al, U.S. Federal Circuit Court of Appeals, No. 2010-1046.