An Ohio woman and her boyfriend can sue a laptop-tracking company that recorded their sexually explicit communications in an effort to identify thieves who stole the computer she was using.

US District Judge Walter Rice ruled last week against Absolute Software, which provides software and services for tracking stolen computers. Absolute sought a summary judgment in its favor, insisting that one of its theft recovery agents acted properly when he captured sexually explicit images of Susan Clements-Jeffrey communicating via webcam with her boyfriend and passed them to police in an effort to recover the stolen computer.

But the judge found that there were grounds to believe Absolute had gone too far, and that a jury might reasonably decide that it had violated the plaintiff’s privacy and broken the law. The case raises an important issue about the length that someone can legally go to recover stolen goods.

“It is one thing to cause a stolen computer to report its IP address or its geographical location in an effort to track it down,” Rice wrote in his decision (PDF). “It is something entirely different to violate federal wiretapping laws by intercepting the electronic communications of the person using the stolen laptop.”

The case revolves around a laptop that Clemens-Jeffrey, a substitute teacher, bought from one of her students in 2008.

The laptop belonged to Clark County School District in Ohio, and had been stolen from one if its students in April 2008. Another student at Kiefer Alternative School subsequently purchased the laptop at a bus station for $40, even though he suspected it was stolen, and turned around and offered it to Clements-Jeffrey for $60.

Clements-Jeffrey, who was a long-term substitute teacher at Kiefer, says the student told her his aunt and uncle had given him the laptop, but that he no longer needed it after getting a new one. She asserts she had no idea the computer was stolen.

Clements-Jeffrey, described in court papers as a 52-year-old widow, had recently renewed a romance with her high school sweetheart, Carlton Smith, who lived in Boston. In the course of their courtship, she exchanged sexually explicit email and instant messages with her beau, using the computer she had just purchased.

What she didn’t know was that Clark County School District, which legally owned the laptop, had purchased Absolute’s theft recovery service, which includes the installation of its remote-recovery software LoJack, onto client computers. The system gives Absolute employees remote access to a stolen computer and allows them to record and intercept any data from the machine.

After the school district reported the laptop stolen, Absolute began collecting the IP address from Clements-Jeffrey’s laptop when it connected to the internet.

Ordinarily, the next step would be for Absolute to provide the address to law enforcement agents so that they could issue a subpoena to the ISP to obtain the user’s name and address. But Absolute’s theft officer Kyle Magnus went further and began to remotely intercept e-mail and other electronic communications going to and from Clements-Jeffrey’s machine in real time.

According to court documents, in June 2008 Magnus began recording Clements-Jeffrey’s keystrokes and monitoring her Web surfing. At one point, while snooping on Clements-Jeffrey’s webcam communications with her boyfriend, Magnus also captured three screenshots, which showed Clements-Jeffrey naked in the webcam images. In one picture, her legs were spread apart.

Magnus subsequently sent the pictures and recorded communications, along with Clements-Jeffrey’s name and contact information, to a police detective. When the police showed up at the plaintiff’s apartment to collect the laptop, they were brandishing the explicit images Magnus had sent them. They then arrested and charged her for receiving stolen property. The charges, however, were dismissed about a week later.

Clements-Jeffrey and her boyfriend, Smith, sued Absolute software, Kyle Magnus, the city of Springfield, Ohio, and two police officers. The plaintiffs allege that the police violated their fourth amendment right, and that Absolute violated the Electronic Communications Privacy Act and the Stored Communications Act and intentionally invaded their privacy.

The case rests largely on whether Clements-Jeffrey knew the laptop she bought was stolen and whether she and her boyfriend then had a reasonable expectation of privacy.

The defendants moved for summary judgment on grounds that courts have ruled in the past that there is no legitimate expectation of privacy in cases involving known stolen property. They asserted that Clements-Jeffrey should have known the laptop was stolen based in part on the $60 price the seller was asking for it and on the fact that the serial number had been scraped off the bottom of the machine.

Clements-Jeffrey, however, asserted she never noticed the missing serial number and had no reason to doubt the asking price for the two-year old machine, since the computer had been wiped clean of software when she bought it. She said Absolute had a right to collect her IP address in an effort to track the laptop, but that it surpassed reasonable search and seizure when it intercepted her communications to track her and passed those images to police. The ECPA statute prohibits intercepting or disclosing the contents of someone else’s wire or other electronic communications without their knowledge.

Absolute also insisted it was acting on behalf of its customer, the school district, and therefore was covered under “color of law” and “safe harbor” statutes. The company cited its agreement with the school district, which gives Absolute’s staff “the ability to view and recover any files that are present” on the school’s computers.

But the school district has asserted that it never knew this meant that Absolute would intercept communications that a suspected thief might have with third parties.

The judge ultimately ruled that although Absolute might have had a noble purpose in assisting the school district in recovering its laptop, “a reasonable jury could find that they crossed an impermissible boundary.”

According to Absolute’s website, it recovers on average 14 laptops a day. Asked if the company’s agents have changed the way they operate in light of the lawsuit, Absolute spokesman Stephen Midgley declined to respond. “Because it’s currently still under legal proceedings, Absolute isn’t commenting on the story at this time,” he said.