The case, which is to be appealed to the California Supreme Court, adds another legal twist to parental custody disputes, which are routinely between a man and woman. The case underscores that laws dealing with parental rights for gay or lesbian couples is in unmapped territory.

The decision, based on a dispute between two California lesbians who both reared twins after one woman gave birth using the other's eggs, is based squarely on a 1993 California Supreme Court parental rights precedent. But a lesbian rights group and the attorney for the losing woman who sought parental rights after the two split up say Tuesday's opinion is outdated, and the court discounted evidence that the couple intended to rear the children as joint parents.

The appeals court, however, ruled that the birth mother, who was artificially inseminated at a San Francisco hospital, has full parental rights despite her lover being the genetic mother of the children.

"An adoption decree would provide objective, formalized proof of the parties' parentage intentions," the 1st District Court of Appeal ruled.

But the losing mother's attorney, Jill Hersh, said her client "didn't adopt because she was the biological mother. She didn't think she had to. The legal system hasn't caught up with the modern-day facts of this case."

Hersh and the National Center for Lesbian Rights said the ruling was a blow to gays and lesbians.

But the winning woman's attorney, Diana Richmond, said the decision "beautifully upholds the freedom of choice of same-sex partners on whether both partners will or will not be the parents."

She said the women in this case, whose identities the court did not disclose to protect the privacy of the 8-year-old twins, "had agreed that only one of them will be the parent."

"She would have to adopt. They never agreed to an adoption and no adoption proceedings were initiated," Richmond said.

The court ruled that, although the losing mother who donated her eggs was a loving, at-home parent – "functioning as a parent does not bestow legal status as a parent."

Shannon Minter, an attorney for the National Center for Lesbian Rights, said if the losing mother, identified in court papers as K.M., was a man, she would have been awarded rights to the children who have moved with the birth mother to Massachusetts and have little contact with the other woman.

"This is just a tragedy for our community. Our families are just as real as anybody else's," Minter said. "These children are going to be just as hurt as anybody else would by losing a parent. Regardless of being married or not, if K.M. was a man, she would have been automatically, without question, a legal parent."

Minter based that assertion on a California Supreme Court decision in 2002 that granted a non-biological father parental rights to a child he helped rear since birth.

But the appeals court based its decision on 1993 California Supreme Court precedent in which a surrogate mother tried to back out of giving her child to a married man and woman. The Supreme Court held the adoptive parents were the lawful parents because it was their intention, not the birth mother's, to be the parents when the child was conceived.

The losing mother in Tuesday's case donated her eggs to her lover in 1995. The women lived together in Marin County with the children until recently, when they separated and the birth mother moved with the kids.

The egg donor went to court to assert parental rights. A lower court, and now the appeals court, said she had none.

The case is K.M. v. E.G., A101754.