LOS ANGELES (Reuters) - U.S. government agents investigating alleged steroid use among 10 Major League Baseball players went too far in seizing test results for hundreds of other people from a California lab and using them to expand the probe, an appeals court ruled on Wednesday.

An investigation of steroid use in sports surrounding the San Francisco-area BALCO lab engulfed sports stars from baseball homerun king Barry Bonds to Olympic sprinter Marion Jones, who went to prison.

Major stars' names are still being linked to the list, which effectively would be lost to investigators, if the government does not appeal.

New York Yankees slugger Alex Rodriguez admitted in February he had used performance-enhancing drugs in 2003 during his playing days with the Texas Rangers after Sports Illustrated said his name was on the list.

The government scooped up the records along with those of the 10 players it suspected of illegal steroid use, then argued that it should be allowed to pursue cases involving records not covered by its original search warrant.

"When, as here, the government comes into possession of evidence by circumventing or willfully disregarding limitations in a search warrant, it must not be allowed to benefit from its own wrongdoing by retaining the wrongfully obtained evidence ..." 9th Circuit U.S. Appellate Chief Judge Alex Kozinski wrote in the 9 to 2 ruling.

The appeals court affirmed lower court rulings that the evidence obtained through the too-expansive search should be suppressed as a violation of Fourth Amendment protections against illegal search and seizure.

The court also laid down new guidelines for conducting searches of electronic records that require government investigators to use a third party to sift through data when records of suspects are intermingled with those of individuals not implicated in criminal activity.

The 9th Circuit panel reversed a ruling by a smaller group of appellate judges which disapproved of the wholesale seizure of the records but allowed the government to use materials.

Major League Baseball Players Association Executive Director Don Fehr said by telephone the ruling would stop the government from using information on the seized list.

"The government won't have it," he said.

A U.S. Department of Justice spokesman said lawyers were reading the case and reviewing options.

The case is United States vs. Comprehensive Drug Testing Inc, Case NO. 05-55354, U.S. Court of Appeals for the 9th Circuit.

(Reporting by Gina Keating, Peter Henderson and Jim Christie; Editing by Eric Walsh)