(Reuters) - The Supreme Court on Friday agreed to decide whether human genes can be patented, a hotly contested issue with broad practical and ethical consequences for the future of gene-based medicine for millions of people worldwide.

The nation's highest court in a brief order agreed to review a case over whether Myriad Genetics Inc may patent two genes linked to hereditary breast and ovarian cancer.

In a 2-1 ruling on August 16, a panel of the U.S. Federal Circuit Court of Appeals in Washington, D.C., upheld the biotechnology company's right to patent "isolated" genes that account for most inherited forms of the two cancers.

That ruling also denied Myriad's effort to patent methods of "comparing" or "analyzing" DNA sequences.

The appeal against Myriad and the University of Utah Research Foundation was being pursued by a variety of medical associations and doctors, led by the Association for Molecular Pathology. Their case is being handled by lawyers for the American Civil Liberties Union.

Myriad shares fell as much as 9 percent after the Supreme Court agreed to hear the appeal and ended the trading session down $1.13, or 3.8 percent, at $28.72 on the Nasdaq.

PLANNING OF MEDICAL CARE

Sandra Park, a lawyer for the ACLU Women's Rights Project who worked on the appeal, in a phone interview called Friday's decision to take the case a "huge step" toward ensuring the provision of needed medical care and research and that patients can access their own genetic information.

She estimated that more than 4,000 of the roughly 22,000 genes in the human genome have U.S. patents.

"For many people, understanding their genetic risk of disease is crucial to planning medical care," she said. "People need to understand that risk so they can plan for screening and other major medical decisions with their doctors."

Supporters of Salt Lake City-based Myriad, in contrast, have said denying patent protection could slow advances in personalized medicine, which uses genetic tests to identify specific therapies for individual patients.

Peter Meldrum, Myriad's chief executive, said in a statement that the Supreme Court's ultimate decision could affect the providing of medical treatment to hundreds of millions of people. He said Myriad's own diagnostic test has helped nearly 1 million people learn about their risk of hereditary cancer.

"The discovery and development of pioneering diagnostics and therapeutics require a huge investment and our U.S. patent system is the engine that drives this innovation," he said.

Many outside groups supported the petitioners, including the AARP, the American Medical Association, the American Society of Human Genetics, the March of Dimes Foundation, the National Breast Cancer Foundation and several women's health groups.

"Some critics say it is unjust to give a company a monopoly over something as intrinsic to people's health as their genes," said Josephine Johnston, a research scholar at The Hastings Center, a independent bioethics research institute in Garrison, New York, who is not involved in the Myriad case.

"From an ethics perspective, one could argue that genes are owned by everybody, and that patenting them amounts to a commodification of an element of the human body," she added.

THE LAWS OF NATURE

The genes in question, BRCA1 and BRCA2, can be used to detect risk of breast and ovarian cancer and aid in treatment options.

Women who test positive using Myriad's gene test, BRACAnalysis, have an 82 percent higher risk of breast cancer and 44 percent higher risk of ovarian cancer in their lifetimes.

But critics said Myriad's patents are illegal, prohibit standard clinical testing of the BRCA1 and BRCA2 genes and restrict scientific research and access to medical care.

The Federal Circuit ruled in Myriad's favor, by the same 2-1 vote, in July 2011.

Eight months later, the Supreme Court unanimously held, in a case involving a blood test developed by Prometheus Laboratories Inc, that companies could not patent observations about natural phenomena.

A week after that decision, the Supreme Court set aside the Myriad ruling and directed the Federal Circuit to revisit the case, leading to the August panel ruling.

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

Circuit Judge William Bryson dissented, saying a ruling for Myriad could pre-empt methods for whole genome sequencing.

THE WHIM OF A COURT

In a brief arguing against the patenting of genes, Dr. James Watson, who helped discover the double helix structure of DNA, said: "DNA's importance flows from its ability to encode and transmit the instructions for creating humans.

"Life's instructions ought not be controlled by legal monopolies created at the whim of Congress or the courts."

In opposing the latest appeal, Myriad said the Federal Circuit applied the correct legal standard and that most of the plaintiffs recruited to join the lawsuit lacked standing.

A decision by the Supreme Court is expected by the end of June.

The case is Association for Molecular Pathology et al v. Myriad Genetics Inc et al, U.S. Supreme Court, No. 12-398.

(Reporting by Jonathan Stempel in New York; Additional reporting by Bill Berkrot and Ransdell Pierson; Editing by Kevin Drawbaugh, Carol Bishopric, Tim Dobbyn and Todd Eastham)