The US Department of Justice’s (US DOJ’s) case against Microsoft Ireland will likely be the “case of the year” for legal practitioners that play in the cross-border and technology arenas. The case is currently before the Second Circuit Court of Appeals, and many people following the case expect to see some action this summer. This post gives a quick update on the background and key issues raised by the case so our clients and readers can be informed as new information develops.

Facts Refresher

In December 2013, the US DOJ successfully applied for a search warrant ordering Microsoft to produce the contents of the email account of a Microsoft user who the government suspected to be a drug trafficker. In complying with the request, Microsoft discovered that while metadata related to the email account was stored in the United States, the main contents of the account were stored in Ireland. Microsoft agreed that it needed to turn over the US metadata, but refused to turn over the content stored in Ireland on the grounds that a US search warrant held no authority in Ireland.

The US DOJ disagreed with Microsoft’s decision, and an ongoing legal battle ensued.

The Battlefront

The legal issues in the Microsoft Ireland case are relatively straightforward; Microsoft claims that a US judge has no authority to issue a search warrant for records stored in a foreign jurisdiction. The US DOJ’s argument centers around two points: (1) the “search” pursuant to the search warrant would not occur until an agent located in the United States reviewed the email account’s contents, so the search would not technically be occurring in Ireland, and (2) a search warrant for data should be treated more like a subpoena, which is not subject to territorial limitations.

Why Is This a Big Deal?

The Microsoft Ireland case raises a lot of important legal issues in the technology (including outsourcing) and cross-border transactions space. A few of the key issues are summarized below:

• If the US government is successful in its attempts to gain access to data located overseas pursuant to search warrants, US companies may be forced to host data only in those jurisdictions where the local law permits such disclosure, in order to avoid serious conflicts of laws issues.
• On the other hand, if the US government is unsuccessful in its attempts to gain access to data located overseas through search warrants, it could significantly limit the government’s ability to catch criminals, especially considering that picking a data host location/country is often a trivial choice unrelated to where a US company (or the host’s users) are located. Faced with such a situation, lawmakers may consider broader regulation of the space.
• This case also raises the question: Is the United States willing to expose itself to the reverse situation? That is, is the United States willing to honor search warrants issued by foreign judges? What if the foreign jurisdiction has a history of not “playing nice” with US politics?

Supreme Court Bound?

Whatever the outcome of the Second Circuit’s decision, it is unlikely that the case will be resolved there. The stakes are too high. On the government side, the threats to policing power are generally considered real and every court so far has agreed with the government’s arguments.

Meanwhile, the oft-maligned Microsoft Corporation has become the unlikely standard bearer for a substantial consumer privacy dispute and has gained some unlikely allies along the way, such as:

• Government of Ireland, European Parliament members
• Telecommunication/broadband carriers such as Verizon and AT&T
• 28 tech and media companies such as Apple, Amazon, eBay, Cisco, and HP
• 23 nonprofits/trade organizations such as EFF, ACLU, Brennan Center and the Software Alliance

Because the stage is international, the stakes are high for both Microsoft and the US DOJ. It is likely that this case will not be resolved until 2016 or later. That said, it should be the topic of much debate for the remainder of 2015. We hope this is a helpful primer for our clients and readers to prepare them for the inevitable flood of questions once the case hits the news again.