Police are examining a dossier concerning the secret trials of the Phorm Webwise internet monitoring software carried out by BT in 2006 and 2007.

The move by the City of London Police came after the force was handed the information by IT specialist Alex Hanff, following a protest by BT customers outside the telecom giant’s annual general meeting in July.

Mr Hanff and privacy experts believe that BT’s trials were illegal and that Webwise breaches privacy laws including the Data Protection Act and the Regulation of Investigatory Powers Act (RIPA).

Dr Richard Clayton, a privacy expert at Cambridge University, who has analysed the software, has written that he is “not happy at all”, and believes that it “performs illegal interception” as defined by the RIPA.

The software, which tracks people’s surfing habits with the stated aim of delivering more targeted adverts, has caused a storm of controversy. As well as BT, two other key UK internet service providers, Talktalk and Virgin Media, have said they have plans to use the software.

Mr Hanff and privacy experts are also deeply concerned about what may eventually happen to any data that is intercepted.

“We are concerned about the potential for further use of individuals’ data in light of the US patent application and Phorm’s DPA registration. The DPA registration makes clear reference to holding financial and personal data and being allowed to ‘export’ this,” Mr Hanff said.

Phorm said it was certain that Webwise didn't breach any UK laws and it is not clear yet if BT faces any further action by the police concerning the trials it did not inform customers about.

A representative for the police said: "City of London Police has not launched a criminal investigation in connection with this matter. We are establishing if any criminal offence has been committed.”

BT said it had no comment to make on the matter of the police investigation.

The Information Commissioner's Office has said in its view, from the information available at this point, Webwise can be used in a way that will not breach UK laws. However it also said it would continue to monitor the situation.

The EU has also stepped into the row and asked the UK Government to clarify if the software breached the laws. However the UK has not responded to the EU yet.