The baby boy was removed from their care four days after he was born in Oregon last year,
Eric Lee Gates and his adult daughter, Chalena Mae Moody, had asked the appeals court to overturn a decision for the baby to be put in foster care.
In March, Moody, 25, was sentenced to 10 days in jail on the incest charge, but got credit for time already served and did not have to serve any additional days behind bars
Authorities say Moody and her father were living as a couple, and have had two children under two years of age.
She also received 18 months probation.
Gates, 49, is currently serving a six-month jail sentence for violating his probation by moving back in with Moody after he was originally convicted of incest in January.
Gates was also ordered to pay restitution to the State of Oregon for the medical expenses of the two children.
Gates and Moody are prohibited from contacting each other while on probation.
Incest, even when both participants are adults, is a felony crime in Oregon.
The pair have two children together - born in 2013 and 2014 - a third died in utero.
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