Microsoft Is in a Court Fight That Could Cost the US Tech Industry Trillions

A court case about the sovereignty of data for American companies operating abroad will have a large impact on the tech industry worldwide. Microsoft is currently fighting a court battle over whether American companies operating abroad can have their data seized by the US government.

The problem is that Microsoft has had data demanded from the US government that resides on servers in Ireland. Microsoft is bound by EU data protection and privacy laws to not release this information. The US government argues that because the data resides on servers owned by an American company it doesn't matter where the data resides, it has a right to seize any data the legal system demands.

The case has not been going well for Microsoft, and a decision was made where Microsoft was ordered to turn over Irish user data to American authorities. Microsoft has not turned over the data, and is instead waiting for the appeals process to shake out. And now it is up to the court to decide if Microsoft, as a corporate entity, can be held in contempt of court for violating a court order. There is no precedent for this type of action being taken, so it will be interesting to see how the courts react to Microsoft so brazenly defying a court's demands.

The stakes are very high for both Microsoft and the US Tech industry. If Microsoft turns over the data, it is likely going to have to have charges, fines, and legal issues in the EU due to their stringent data protection laws that have arisen due to the ongoing NSA scandal. Microsoft can also be levied heavy fines if found in contempt of court, damaging their bottom line and hurting their investment potential. If the tide of the case shifts and Microsoft wins its court battle, then law enforcement and spy agencies lose one of their tools to gather evidence and prosecute criminals outside of their national jurisdiction.

The bigger picture for the industry is that if Microsoft loses this landmark case, the US tech industry will lose even more public trust that their data is secure from prying eyes like spy agencies. Huge cloud based products like Skydrive, Office 365, Outlook Webmail, and any devices that sync to "the cloud" would now (again) be subject to American whims, despite national and international laws explicitly making those actions illegal.

It will undoubtedly cost American companies billions, as we have already seen for companies that sell cloud and networking services internationally. Further erosion of trust in American products gives more clout to foreign alternatives, and even gives incentives to American companies to move their products to foreign sources to protect their data and privacy.

It could also lead to trade disputes worldwide over the sovereignty of data, and shift entire industries to nations that protect data sovereignty.

The US networking, online storage, and cloud industries are currently enormous and growing in popularity and integration into our lives. Over the next few decades, we can easily be talking about trillions of dollars in sales related to these products. This court case could shift everything to foreign companies and stifle investment and innovation at home.

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