Wow,
Seems like you made a mistake and were man enough to admit to it, no big deal, no damage done. I hope they do indeed back off, although that would involve having a modicum of sense and an ability to show an understanding of the public's attitude from a PR point of view (Something both BT and Phorm have so far failed to do). If they do pursue you I'm sure there are enough people who support you to make it an absolute PR nightmare for them.
I just don't understand the world sometime, it seems it's OK for a huge corporation like BT, with the assistance of evil empire Phorm, to break the law millions of times with what appears to be no repercussions and a distinct lack of interest from the home office, yet the one time you step out of line (in their opinion) and they instantly look into suing you. You better be careful Alex, I hear Kent will be pushing for the death penalty
Anyway, hope it works out ok.