(Bloomberg) --Microsoft Corp. won’t be forced to turn over e-mails stored in Ireland to the U.S. government for a drug investigation, an appeals court said in a decision that may affect data security throughout the U.S. technology industry.
The ruling on Thursday overturned a 2014 decision ordering Microsoft to hand over messages of a suspected drug trafficker. The company argued that would create a “global free-for-all” with foreign countries forcing companies to turn over evidence stored in the U.S. The government said a ruling in favor of Microsoft would create legal loophole to be exploited by fraudsters, hackers and drug traffickers.
The law doesn’t “authorize courts to issue and enforce against U.S.-based service providers warrants for the seizure of customer e-mail content that is stored exclusively on foreign servers,” U.S. Circuit Judge Susan Carney wrote for the majority of the New York appeals court.
Peter Carr, a spokesman for the U.S. Department of Justice, didn’t immediately reply to a message seeking comment on the ruling. Microsoft had no immediate comment.
While this case was somewhat overshadowed in recent months by the battle between Apple Inc. and the U.S. government over access to a terrorist’s iPhone, it has been closely watched by the technology industry with more than two dozen companies, including Apple, Amazon.com Inc. and Cisco Systems Inc., backing Microsoft in court.
The dispute centered on the Electronic Communications Privacy Act of 1986, a law passed before the widespread use of e-mail, instant messages and Internet-based social networks. Its aim was to protect user privacy and the law didn’t envision the application of warrant provisions overseas, the appeals court said.
As more technology companies sell customers the ability to process and store their data using Internet-based cloud services, information is increasingly being housed in massive data centers around the world, a situation that the relevant U.S. law didn’t anticipate when it was written three years before the invention of the World Wide Web.
The name and home country of the customer involved in the case haven’t been made public.
Microsoft, and it’s partners and rivals, had argued that giving the U.S. government access to data stored overseas could create a chilling effect on the rapidly growing cloud technology sector and push international clients, particularly in government and highly regulated industries, to avoid U.S. cloud providers.
The process of requesting evidence through foreign governments can be time-consuming. American law permits them to get the data directly from U.S.-based companies that choose to store it offshore, prosecutors said.
The case is In the Matter of a Warrant to Search a Certain E-Mail Account Controlled and Maintained by Microsoft Corp., 14-02985, U.S. Court of Appeals for the Second Circuit (Manhattan).