Privacy/Business Confidentiality Versus Government Demand in Microsoft Cloud Appeal

The age of cloud computing has brought with it multiple high-profile issues for business planning and mitigation of legal risk.  Among the most interesting is the ongoing clash between private rights in cloud-stored data and the right of the government to access it for law enforcement purposes.  We have seen the issue crop up in cross-border matters, where the US government has argued that US corporate data stored on overseas servers should be reachable.  Microsoft has been at the forefront of many of these issues.  In the current case, it is barred as the cloud storage provider from telling its client about a government subpoena for the client's records.  

For cloud providers and customers, this is worth some attention during the contract phase.  Most service agreements have a confidentiality clause requiring notice if either party has to reveal the other's confidential information in litigation.  It will be difficult for a cloud provider to comply with that kind of standard provision if forced to divulge client information without the client knowing it.  Likewise, if client information contains any data regulated by privacy law, the provider may have a contractual or statutory obligation to secure and protect such data that conflicts with any government subpoena.  Cloud providers should give themselves some contractual protection where possible; and cloud customers should understand these competing obligations and know that they are not yet settled law.