updated 9/6/2011 7:06:28 PM ET 2011-09-06T23:06:28

An Ohio woman on Tuesday settled a lawsuit that alleged her privacy was violated when a company grabbed sexually explicit images of her and her boyfriend from a computer she didn't know was stolen.

Absolute Software Inc. of Bellevue, Wash., improperly lifted the webcam images along with instant messages and gave them to police as part of the company's attempt to retrieve the laptop, Susan Clements-Jeffrey, said in her 2009 lawsuit that was scheduled for trial Sept. 12.

Related story: Tracking no excuse to record teacher's naked chat pics

A federal judge ruled late last month that because Clements-Jeffrey, a teacher in Springfield, did not realize the laptop she bought for $60 was stolen, she could argue that she had an expectation of privacy.

Clements-Jeffrey had also sued Springfield police, alleging they illegally disclosed the images and arrested her without a proper warrant.

Springfield city officials and Absolute Software denied the claims.

The lawsuit was settled Tuesday with lawyers saying they couldn't comment.

The case dates to 2008 when someone stole a laptop belonging to a vocational student at the Clark County School District, according to court records.

A ninth-grade student at a different school bought the laptop at a bus station for $40, suspecting it was stolen, and sold it for $60 to Clements-Jeffrey, a teacher at his school, court records show.

Clements-Jeffrey, 52, used the laptop to trade messages and images with her out-of-state boyfriend, not realizing that software on the computer used to trace stolen laptops had been activated and was tracking the machine's location.

She was arrested on June 25, 2008 by Springfield police, who showed her copies of the sexually explicit images. But charges of receiving stolen property were quickly dropped. Clements-Jeffrey and her boyfriend sued in March 2009.

U.S. District Court Judge Walter Rice refused to dismiss the lawsuit last month and sided with Clements-Jeffrey's arguments about why the case should continue.

Although the company "may have had a noble purpose, to assist the school district in recovering its stolen laptop, a reasonable jury could find that they crossed an impermissible boundary when they intercepted (the) plaintiffs' instant messages and webcam communications," the judge wrote.

"A reasonable jury could also find that such conduct would cause of person of ordinary sensibilities to suffer shame and humiliation," he wrote.

Because computer tracking software can't prove who was working on a stolen computer, it's common for companies to seize webcam images to prove who the culprit was, said Fred Cate, a professor of information law at Indiana University.

"The company's going to get a lot of leeway when it says, 'Look, we were just trying to figure who was using this stolen computer,' " he said.

The lawsuit called to mind a 2008 case in suburban Philadelphia in which thousands of photos and screenshots were taken by school-issued laptops whose remote tracking program was sometimes left on inadvertently for months after missing laptops were located.

Lower Merion School District has settled several lawsuits over the issue.

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