The Crown Prosecution Service has decided not to prosecute BT over secret trials of Phorm behavioural advertising technology in 2006 and 2007.
A CPS spokesman told ZDNet UK: "It's possible the law has been infringed, but there is insufficient evidence [to prosecute]... Possibly much more evidence could be gathered... [but] if we put our case to a jury, would they convict?"
The spokesman said that there was "no human intervention in the process and the data was destroyed", with "no significant detriment" to the 18,000 people who had unwittingly participated in the trials.
"It was an honest mistake," the spokesman added, saying that while there is not enough evidence to convict, there is enough evidence to show that it would not be in the public interest to pursue a prosecution.
In a blog post on Friday the CPS said that BT and Phorm had sought legal advice, so if the companies had broken the law, "any offending was the result of an honest mistake or genuine misunderstanding of the law." In addition, privacy watchdog the Information Commissioner's Office had decided that there was "no evidence to suggest significant detriment to the individuals involved". The ICO investigation occurred at a time when the organisation did not have any investigation experts with technical training.
Hanff, who sought a private prosecution, told ZDNet UK that he was disappointed and angry at the decision.
"The phrase 'ignorance is no excuse in the eyes of the law' only applies to the common man, and not to big business," said Hanff. "We've seen that today."
Hanff is considering a complaint to the the Solicitors Regulation Authority (SRA) about the legal advice that BT and Phorm received, an appeal against the CPS decision on human rights grounds, and he will seek a judicial review. He will ask for donations for the proceedings.
The government's reaction to the Phorm trials prompted the European Commission to launch infringement proceedings against the UK in 2009.