As many of you probably know, there are now plenty of companies out there that can help you retrieve your laptop, should it fall into the wrong hands.

These companies do this by activating pre-installed software once your computer is reported stolen – software that can track the location of your laptop through GPS, access the thief’s IP address, and even monitor the thief’s activity. The latter means tracking keystrokes, messages, emails, and even real-time communications happening via webcam.

An Ohio woman has been given the go-ahead to sue one of these laptop-tracking companies after they captured sexually explicit images from a live communication between her and her boyfriend.

Absolute Software, whose products LoJack for Laptops helps to recover stolen computers, is on the bad end of this decision.

Here’s the story of how a long-term substitute teacher’s sex pics were captured by Absolute and eventually used by law enforcement officers:

The Clark County Ohio school district purchased a bunch of laptops for school use years ago. One of those laptops was issued to a vocational student and in 2008, it was stolen from a public library. The vocational student reported the theft to the Police.

That stolen laptop was eventually purchased by a 9th grader at an alternative school within the Clark County School District. He purchased it for $40 at a bus station and subsequently sold it to long-term sub Susan Clements-Jeffrey for $60. He apparently made up a story about not needing the computer, which was a gift from his aunt and uncle.

The laptop in question was busted up and had been wiped of some software but another teacher at the school repaired it for Clements-Jeffrey.

Little did Clements-Jeffrey know, but when the school district purchased the laptops, thy entered a security contract with Absolute Software. Back in April 2008, when the vocational student reported the laptop in question stolen to police, Absolute was contacted and the “tracking alarm” was triggered. “The stolen laptop was directed to report its IP address to Absolute the next time the laptop was connected to the internet,” says the court documents.

Absolute also prompted the laptop to download a bunch of software that would allow them to intercept communications and monitor activity in real time.

And in June 2008, a Absolute “theft recovery officer” used this ability to monitor webcam communications between Clements-Jeffrey and her boyfriend. During that 30-second monitoring period, the tech took three screencaps of the live video.

In these pictures, Clements-Jeffrey is naked and in one she is spreading her legs.

After all this information was reported to the police, they brought her in for questioning. According to Clements-Jeffrey, the officers showed her the explicit images obtained by Absolute and laughed at her, mocked her and told her she should have known better than to do this stuff on the web.

The charges for having the stolen property were later dropped, as Clements-Jeffrey denied having seen the scratched-off serial number and claiming that $60 for the 2-year-old laptop didn’t raise any red flags. She remains steadfast that she didn’t know the laptop was stolen.

Now, she is suing Absolute software for the ordeal. She claims that her fourth amendment rights against illegal search and seizure were violated and that Absolute violated her privacy based on the Electronic Communications Privacy Act and the Stored Communication Act.

Absolute hit back that Clements-Jeffrey had no expectation of privacy, as the laptop was stolen. From Wired –

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.

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.

The Judge has ruled, however, that “a reasonable jury could find that they crossed an impermissible boundary.” The suit can move forward.

In June, we told you about another computer-recovery company called Hidden that got their name in the news by finding a man’s MacBook. The victim set up a blog where he posted images that the Hidden app was taking of the thief in real-time.

This ruling is a big decision when it comes to how far these companies can go to retrieve stolen property. Should IP addresses and GPS be enough? Should they have the right to monitor sensitive communications from suspected thieves?

You can read the full court decision here.