Internet Privacy: fact or fiction?

Reading a news article on Motion Picture Association of America (MPAA) being forced to take down University Toolkit for violation of GPL license, I started to think how deep our privacy is being violated. As Brian Kerb of Washington post describes in his article, the University Toolkit is essentially a monitoring software, just Privacy is not a crimeidentifying people with highest amount of network traffic with the file name, port address and traffic volume.

Beyond the irony of a copyright enforcing institution having to take down a software because of copyright violation, the software itself really annoys me. Imagine such observation shows some illegal activity going on the university network. Can this observation be used in a court of law? If not, why should such observation be done then. If yes, is it not a violation of “reasonable expectation of privacy”? If tapping someone’s internet activity is considered legal without a court order, same would hold for phone wire tapping. I am sure there is a problem in here, a huge problem!