The European Parliament voted against a directive allowing the patenting of human genes on Wednesday after seven years of consideration.
European Union procedures lay down that a proposal which parliament has rejected lapses.
The directive would have allowed patenting but given the force of law to ethical considerations in the patenting of human genes and the genetic alteration of animals.
The EU Council of Ministers has been sympathetic to the European biotechnology industry, which has resisted ethical considerations being taken into account patenting on the grounds that its Japanese and United States competitors suffer no such restraints.
Parliament has now rejected a compromise text which would have allowed gene patenting subject to ethical considerations.
Greenpeace, which has led the campaign against any form of gene patenting, said: "This sends a clear democratic signal that people aren't ready for it."
Nick Scott Ram, chairman of the Bioindustry's Intellectual Property Advisory Committee, said: "If the vote means the directive is re-examined and there's a strong move to make it even more unacceptable, this would be detrimental to the industry."
Similar clauses to the rejected draft are built into the operations of the European Patent Office which has already granted gene patents.
Greenpeace hopes that the office will respond to the vote by interpreting its own rules more strictly.