LMO stands for "living modified organisms", which are those organisms that have been genetically modified through the application of biotechnology including organisms that have been modified by novel recombinant DNA techniques as well as those that have been modified by mutagenesis or classical breeding and selection techniques.
Genes are not invented but LMOs are patentable because they are covered by DNA patents viewed as created by human endeavour rather than nature.
The first and most famous LMO case that set the precedent was Diamond v. Chakrabarty. In 1971 Professor Ananda Mohan Chakrabarty, then a scientist for General Electric, created a "genetically modified" microorganism that ate hazardous waste. General Electric then went to the United States patent office claiming they had "invented" this bacteria and needed a patent - the first patent on a genetically engineered organism.
The Patent Office immediately turned down the request citing a living organism cannot be patented.
In 1980 the U.S Supreme Court ruled in favor of Chakrabarty/General Electric. The Supreme Court finding in favor of "artificial products" over "natural products" in the Chakrabarthy case was the basis of the 1988 patent grant for the "Harvard-mouse" or OncoMouse developed as a cancer research tool.[1] The rights to the invention are owned by DuPont.