LUXEMBOURG (Reuters) - European law forbids patenting any process which involves removing a stem cell from and then destroying a human embryo,Europe's top court ruled on Tuesday, a judgment with deep ramifications on medical research.

The ruling by the European Court of Justice concerned a method invented by Oliver Bruestle of the University of Bonn for converting human embryonic stem cells into nerve cells. The court's decision had been seen as critical for the development in Europe of stem cells for the treatment of a range of diseases from Parkinson's to blindness.

"It means that fundamental research can take place in Europe, but that developments that follow from that cannot be implemented in Europe," Bruestle said after the verdict.

"It means European researchers can prepare these things but others will pick the fruits in the U.S. or Asia. That is very regrettable."

The judgment concerned stem cells in the blastocyst stage, just before implantation, when the embryo consists of around 80 to 100 cells.

The ECJ said: "A process which involves removal of a stem cell from a human embryo at the blastocyst stage, entailing the destruction of that embryo, cannot be patented."

The court said its ruling reflected European law, which protects human embryos. A European directive on biotechnology patents "intended to exclude any possibility of patentability where respect for human dignity could thereby be affected," it said.

The use of embryonic stem cells has long been subject to fierce controversy. Critics argue it is wrong because the ultimate source of these cells involves the destruction of embryos, which are left over from fertility treatment and are donated for research.

Tuesday's judgment followed a case brought in Germany by Greenpeace, challenging a patent filed by Bruestle in 1997.

A German court ruled the patent invalid, and after Bruestle appealed, Germany's Federal Court of Justice referred questions to the ECJ. In March, Advocate General Yves Bot handed down a legal opinion, which the ECJ effectively upheld on Tuesday.

"We wanted a fundamental decision on how the protection of human embryos is to be laid out under EU patenting law," said Christoph Then, a Greenpeaceofficial, in Luxembourg. "The court has ... said that ethics take priority over commercial interests."

Several small biotechnology companies are pioneering stem cell treatments in Europe and the United States. Big pharmaceutical companies -- including U.S. drugs giant Pfizer, Anglo-Swedish firm AstraZeneca, Swiss drug maker Roche and French company Cellectis -- are also starting to conduct research in the area.

Early trials are now under way using embryonic stem cells for repairing spinal cord injuries and to correct certain forms of blindness. Stem cells also have potential in treating other conditions including stroke damage, Parkinson's disease, heart disease and diabetes.

European research is being carried out in Britain and Sweden as well as Germany, said Mr. Bruestle. He said that the judgment would undermine such research because it would make patents uncertain.

"Many years of intensive research are being destroyed," he said. "It's an unbelievable setback for biomedical stem cell research."

(Reporting By Michele Sinner; Writing by Sebastian Moffett)