Actually it is possible. I've asked the Swiss customer service about this and this is what they told me

Thank you for your inquiry regarding your seat reservation. [size=10pt]Regarding your inquiry, if you wish to reserve an Extra Legroom seat in Economy Class and have been successfully upgraded to Business Class through our Bid Upgrade program, that is indeed possible. In this case, we would like to clarify that the fee paid for the Extra Legroom seat will be refundable.[/size]


Btw the Lufthansa terms and conditions state the same:

Seat reservations alone are not refunded. However, if you have purchased an upgrade to a higher travel class, the seat reservation you previously purchased is refundable.