The logger/spyware they used to harvest the pirate's passwords is indeed breaking the law. While it allegedly doesn't target everyone and only affects the specific person's computer, it is most probably unlawful -evidence gathered illegaly don't stand in (most of) the courts.
While I disagree with this practice, we all know that FSL has spent huge sums of money to develop an exquisite product as well as that it sometimes takes a thief to catch a thief.