The demonstrators heard judge John Wood tell London's high court yesterday that they had 'no defence' against possession orders granted to the department last month.
The judge roundly rejected as hopeless their bid to have the case referred to the European Court of Justice, saying that the law was in no need of clarification.
Protester Paul Goillon, known as 'Badger', - who had appealed against the possession orders along with Oliver Berry - came away with nothing from the hearing but a heavy legal costs bill.
Judge Wood's decision opens the way for the DoT to take steps to evict demonstrators from Spelsmoor Common, where an elaborate network of tree houses and tunnels stand in the way of the £100m road scheme.
The protesters say the construction work will damage three sites of special scientific interest, a number of local nature reserves, two historic battlefields, an area designated to be of outstanding natural beauty and 12 archaeological sites.
Their solicitors, John Dunkley, said after Judge Wood's ruling: 'We are disappointed with the result, but we are going to appeal because we are confident that our legal arguments stand up.'
The judge said there was no dispute that the demonstrators were 'trespassers'. 'There is no issue, it is perfectly clear and common ground, that the demonstrators do not seek to make any claim to a right to be there.'
But it was their case that the compulsory purchase of land along the by-pass route had been done without an assessment of environmental impact as required by EU law.
But the judge said the EU Directive on which the protesters relied had not come into force until July 1988, by which time the by-pass plans were well advanced.
The law was 'clear' and there was no need whatsoever for a reference to the European Court of Justice, he added.
'I am quite unable to find that there was any defence to the possession orders. If the secretary of state for transport has no right to possession, it occurs to me to ask the question 'Well who has?''
The judge refused Mr Gallon and Mr Berry leave to appeal against his ruling and ordered them to pay the action's legal costs.
But the pair may still apply directly to the Court of Appeal for leave to again challenge the validity of the possession orders.