The man was arrested at his home in February as part of an probe by Kent Police's domestic extremism unit.
Officers were seeking the identity of an Indymedia UK user who had posted the home address of Mr Justice Neil Butterfield and an invitation to "tell him what you think". Mr Justice Butterfield is a senior judge who had recently handed down jail sentences for blackmail to a group of animal rights extremists.
Indymedia UK had told Kent Police it did not keep server logs and was incapable of helping to identify the poster. The assurances did not satisfy detectives, who obtained a warrant to seize a server from a Manchester colocation site owned by UK Grid.
The UK Grid contract the server was registered under was held by the Sheffield IT worker. He ran several machines at the site for small businesses and had agreed to add the Indymedia UK server as a favour.
This was his only involvement: he did not have software adminstrator privileges, so could not have accessed server logs even if they had existed.
Nevertheless, after two weeks of repeated discussions of this fact, Kent officers travelled to Sheffield and raided the man's home at 7am on February 9. They seized computer equipment and questioned him for several hours at a local police station.
It marked the first recorded use of broad new powers granted by the Serious Crime Act 2007. He was arrested under suspicion of offences including "encouraging or assisting an offence believing it will be committed". Indymedia UK described the arrest as "an attack on press freedom".
The IT worker was bailed to reappear at the police station three months later. In May, he was bailed again until the end of August while investigations continued.
A spokeswoman for Kent Police today confirmed the case has now been dropped and no charges will be brought. However, she said the broader investigation to identify the Indymedia UK user who posted Mr Justice Butterfield's address would continue.
She declined to discuss the investigation of the IT worker, citing ongoing inquiries