The dispute stems from a 2013 federal effort to get emails that the government says would show evidence of drug trafficking. The data was stored on Microsoft servers in Ireland.
The appeals court ruled that Microsoft could not be forced to turn over emails sought in the narcotics case that were stored in Dublin.
Large scale email service providers including Microsoft and Yahoo! have refused to comply with warrants issued for certain communications held on overseas servers, according to a brief from the US government urging the Court to take the case.
Microsoft says its policy at the time of the search warrant was to store email content in the data center nearest to the customer's self-declared country of residence, while keeping account information on US servers. In 2014, the court ruled that police need a warrant to search a cellphone seized during an arrest.
The case involved information stored on a Microsoft server in Ireland that the USA government believed it should have access to under warrants issued in the US. A three-judge panel said the 1986 Stored Communications Act wasn't created to cross worldwide boundaries. The full 2nd Circuit split on whether to rehear the case. Rather than rely on decades-old and pre-cloud laws, Microsoft is championing new legislation like the International Communications Privacy Act (ICPA) of 2017 and other efforts to safeguard user data and help establish a clear path for law enforcement activities involving a globe-spanning cloud marketplace. The panel's ruling, the department's brief said, "is causing immediate, grave and ongoing harm to public safety, national security and the enforcement of our laws". "Under this opinion, hundreds if not thousands of investigations of crimes- ranging from terrorism, to child pornography, to fraud-are being or will be hampered by the government's inability to obtain electronic evidence".
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The corporate giant noted that the Justice Department has asked Congress to amend the law to address just that issue. Finally, Smith argued that if the USA government acts unilaterally to seize emails located overseas with search warrants, there is little to stop foreign governments from exercising the same maneuver on data stored in the United States. If domestic disclosure warrants cannot be served on the foreign servers of United States companies, US law enforcement can lean on treaties with the country that the servers are based in. With so many USA tech companies serving foreign countries, a ruling would have a global impact.
A ruling in the DOJ's favor could dissuade customers from using cloud services.
The case will pit federal and state officials against the technology industry, which has lined up behind Microsoft in the litigation.
Looking at an American Express practice: The court also agreed to decide whether American Express can stop businesses from steering customers toward competing credit cards.