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UK declines to prosecute BT, Phorm over spying software

The Crown Prosecution Service maintains a trial would not be in the public's interest

After a more than two-year investigation, U.K. prosecutors will not bring a case against BT and an online advertising software company for running secret trials of software that monitored people's Web browsing without their consent.

The Crown Prosecution Service said Friday it had not reviewed all of the evidence but had seen enough to conclude that a prosecution of BT and the company Phorm was not in the public interest.

BT ran three trials of Phorm's Webwise software, which monitors a person's Web browsing and search terms in order to serve up related advertisements. Two of those trials -- one involving about 18,000 BT broadband subscribers in September and October of 2006 -- did not obtain consent of users.

The trials were brought to the attention of the CPS by digital rights activists, who maintained BT and Phorm broke the law by not obtaining consent from users.

They contended the companies potentially violated the U.K.'s Data Protection Act, which mandates that personal data can't be processed without consent. The trials could have also conflicted with the Regulation of Investigatory Powers Act (RIPA) of 2000, which makes it illegal to monitor communication between two entities without proper consent.

However, the CPS said both companies received legal advice from agencies such as the Home Office that the trials did not violate RIPA. The U.K.'s data privacy watchdog, the Information Commissioner's Office, also said there was no significant detriment to those who were included in the secret trials, and that if taken to court, the companies would likely have faced only a nominal penalty.

After running the second trial, BT received conflicting legal advice that led the company to make the third trial public and open, the CPS said.

"As there was no evidence to suggest either company acted in bad faith, it could be reasonably argued that any offending was the result of an honest mistake or genuine misunderstanding of the law," the CPS said in a statement on its website.

Phorm's Webwise system places a cookie on users' computers that contains an anonymous user ID that is associated with certain categories, such as "cameras" or "computers," which determines the ads a person may see on Web pages that use Phorm. Phorm contended the data was anonymized and could not be traced back to an individual user.

Although Phorm had drawn interest from other U.K. broadband providers, the conflict over the trials hurt the company as prospective partners stepped away.

The company reduced the size of its U.K. staff last year while opening an office in Brazil, where it launched a product called Navegador with operator Oi last month and a trial of the same product with Telefonica last year, according to a financial report released on Sept. 30, 2010.

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