BT and TalkTalk demanded a judicial review of the Act, claiming that it violated EU laws on privacy and electronic communications. In April the High Court rejected their claim and the Court of Appeal has now refused to hear an appeal.
Following the High Court's decision TalkTalk said it was considering taking the case to the European Court of Justice, but in May the two firms decided to ask the Court of Appeal to review the High Court's decision instead.
Neither BT nor TalkTalk would confirm if they would present further legal challenges to the Act following the Court of Appeal decision not to hear their appeal.
"We are currently considering our position," a spokesman for TalkTalk told OUT-LAW.
The DEA allows for regulations to be made that force internet service providers (ISPs) to disconnect users if copyright holders believe the user is violating their rights.
BT and TalkTalk challenged the plans in a judicial review by the High Court, challenging the parts of the Act that they said could make ISPs responsible for the copyright infringement of users.
Ofcom, the UK's media regulator, drafted plans last year that would force ISPs to hand over details of customers who were illegally sharing files of copyrighted material to copyright holders to allow them to take action. If the Government enacts Ofcom's draft code ISPs could have to suspend users' internet access if they are found to be illegally downloading copyrighted material.
Mr Justice Kenneth Parker said in his High Court ruling that provisions in the DEA for the new copyright infringing measures would have a "positive effect" on illegal infringement and said it was acceptable for copyright holders to obtain personal data about suspected infringers of their rights.
Following the ruling BT and TalkTalk asked the Court of Appeal to consider whether the DEA breaches the EU's Technical Standards Directive, Authorisation Directive, E-Commerce Directive, and the Privacy and Electronic Communications Directive.
The Privacy and Electronic Communications Directive governs what information can be gathered from electronic communications and says that ISPs should not be responsible for material sent over their network unless informed about infringements of the law.
Technology lawyer Claire McCracken of Pinsent Masons, the law firm behind OUT-LAW, said that the refusal to hear the appeal of the judicial review comes as a blow for the ISPs.
"A declaration that the DEA was incompatible with EU laws would have put pressure on the UK Parliament to revisit the Act, which was rushed through in the final days of the last Parliament", said McCracken.
"ISPs are concerned that they will invest millions of pounds to comply with the provisions of the DEA, only to find out in the long run that it is contrary to EU laws. The fact that BT and TalkTalk may now have to consider a reference to the European Court only adds to the uncertainty and regulatory burden for the ISPs".
A spokesman for the Department for Culture Media and Sport told OUT-LAW last month that it did not expect to implement Ofcom's copyright infringement rules into the DEA until 2012.