Microsoft Wins Landmark Appeal on Overseas Data Searches

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A federal appeals court on Thursday said the U.S. government cannot force Microsoft Corp and other companies to turn over customer emails stored on servers outside the United States.

The 3-0 decision by the 2nd U.S. Circuit Court of Appeals in Manhattan is a defeat for the U.S. Department of Justice and a victory for privacy advocates and for technology companies offering cloud computing and other services around the world.

Circuit Judge Susan Carney said communications held by U.S. service providers on servers outside the United States are beyond the reach of domestic search warrants issued under the Stored Communications Act, a 1986 federal law. “Congress did not intend the SCA’s warrant provisions to apply extraterritorially,” she wrote. “The focus of those provisions is protection of a user’s privacy interests.”

Microsoft had been challenging a warrant seeking emails stored on a server in Dublin, Ireland, in a narcotics case. It was believed to be the first U.S. company to challenge a domestic search warrant seeking data held outside the country. Thursday’s decision reversed a July 2014 ruling by then-Chief Judge Loretta Preska of U.S. district court in Manhattan requiring Microsoft to turn over the emails. It also voided a contempt finding against the company.

“We obviously welcome today’s decision,” Brad Smith, Microsoft’s president and chief legal officer, said in a statement. He said the decision gives people more confidence to rely on their own countries’ laws to protect their privacy, rather than worry about foreign interference, and helps ensure that “legal protections of the physical world apply in the digital domain.”

The case has attracted strong interest from the technology and media sectors, amid concern that giving prosecutors expansive power to collect data outside the country could make it harder for U.S. companies to compete there. Dozens of companies, organizations and individuals filed briefs supporting Microsoft’s appeal, including the U.S. Chamber of Commerce, Amazon.com Inc, Apple Inc, Cisco Systems Inc, CNN, Fox News Network, Gannett Co and Verizon Communications Inc.