The American Civil Liberties Union and a host of researchers and breast cancer patients aren’t the only losers in Friday’s appellate ruling that Myriad Genetics has the right to patents on isolated breast cancer genes. The Obama Administration’s Justice Department offered wholehearted support to opponents of human gene patents, splitting with the U.S. Patent and Trademark Office to argue that human DNA should not be eligible for patent protection. Friday’s ruling by a deeply-divided three-judge panel of the U.S. Court of Appeals for the Federal Circuit explicitly rejects the Justice Department’s arguments in favor of longstanding PTO precedent.

The Justice Department’s decision last November, after considerable lobbying by both sides of the human gene patentability debate, to side with the ACLU and oppose DNA patents, was a huge coup for folks who believe the human genome doesn’t belong to anyone. The Obama Administration’s amicus brief seemed to repudiate PTO policy: the PTO, after all, has issued more than 2,500 patents on human genes since the 1980s, and reaffirmed its policy that unaltered DNA is eligible for patents in its 2001 review of eligibility rules. (Notably, no PTO lawyer’s name appeared on the Justice Department filing.) And when acting-Solicitor General Neal Katyal informed the Federal Circuit that he would personally present the Justice Department’s position at oral arguments in April — an unprecedented appearance at the Federal Circuit by the SG — the ACLU’s lead lawyer on the case, Christopher Hansen, told me it was a good sign for his side.

Katyal’s argument certainly made an impression on the three-judge Federal Circuit panel. All three Federal Circuit opinions the Myriad case generated — a majority decision by Judge Alan Lourie; a concurring opinion by Judge Kimberly Moore; and a dissent by Judge William Bryson -- discussed the SG’s “magic microscope” theory. Katyal asserted that the PTO should evaluate DNA patent applications with an imaginary microscope. If the material to be patented could be seen in an unaltered state through the “magic microscope,” the patent should be denied, he argued. And because the breast cancer genes at issue in the Myriad case have not been manipulated in any way but are part of the human genome, the Justice Department asserted, they fail the magic microscope test and should not be patented.

Judge Moore’s dissent noted the “curb appeal” and “child-like simplicity” of Katyal’s magic microscope theory, but concluded that the Myriad breast cancer genes would pass the test. “An isolated DNA molecule has different chemical bonds as compared to the ‘unisolated’ sequence in the chromosome (the ends are different),” she wrote. “In short, the claimed molecules cannot be seen in nature through the magic microscope.”

More significantly, both Judges Moore and Lourie found that the Justice Department can’t simply override years of PTO precedent holding that human genes are eligible for patents without a Congressional mandate. “Congress has not indicated that the PTO’s position is inconsistent with [the patent law],” Judge Lourie wrote. “If the law is to be changed, and DNA inventions excluded from the broad scope of [the statute], contrary to the settled expectation of the inventing community, the decision must come not from the courts, but from Congress.” (Judge Moore’s concurrence added: “It is tempting to use our judicial power in this fashion, especially when the patents in question raise substantial moral and ethical issues related to awarding a property right to isolated portions of human DNA — the very thing that makes us humans, and not chimpanzees. The Solicitor General’s invitation is tempting, but I must decline the opportunity to act where Congress remains silent.”)