Tech giant Microsoft scored a major legal victory yesterday with a unanimous decision by an appeals court that ruled warrants issued by U.S. authorities do not extend to data stored in other countries. The ruling by the Second U.S. Circuit Court of Appeals was applauded by the vast majority of the tech industry, which had strongly supported Microsoft’s case against the government.

“The decision is important for three reasons: it ensures that people’s privacy rights are protected by the laws of their own countries; it helps ensure that the legal protections of the physical world apply in the digital domain; and it paves the way for better solutions to address both privacy and law enforcement needs,” Microsoft president and chief legal officer Brad Smith said in a statement about the decision.

Territorial Limitations

The case centered around a previous decision by the U.S. District Court for the Southern District of New York, which had ruled against Microsoft’s efforts to quash a warrant issued under the Stored Communications Act (SCA). The SCA is part of the broader Electronic Communications Privacy Act passed in 1986 designed to protect the privacy of users interacting with an electronic communications service provider.

The warrant directed Microsoft to seize and produce the contents of an email account that it maintained for a customer who used the company’s electronic communications services. The government stated that it believed the emails contained information about narcotics trafficking.

But the information the government requested was stored on servers in Ireland, and Microsoft refused to transfer the data to the U.S. In explaining its decision in favor of the company, the appeals court explained that “warrants traditionally carry territorial limitations: United States law enforcement officers may be directed by a court-issued warrant to seize items at locations in the United States and in United States-controlled areas . . . but their authority generally does not extend further.”

A Ruling for Privacy

The decision was immediately hailed by technology companies, business groups, and privacy advocates. “This ruling is a major affirmation that the rights we enjoy in the physical world continue to apply in the digital world,” said Greg Nojeim, director of the Freedom, Security and Technology Project for the Center for Democracy and Technology. “By declaring that a U.S. warrant cannot reach communications content stored abroad, the court ruled strongly in favor of privacy and national rule of law.”

Amicus briefs supporting the company had been signed by the Chamber of Commerce, AT&T, Verizon, Apple, Cisco, and the National Association of Manufacturers. The Republic of Ireland also supported Microsoft's case, arguing that the warrant represented an assault on the nation’s sovereignty.

While the decision is certainly a win for Microsoft, the government may yet appeal. The case could eventually end up before the U.S. Supreme Court. The U.S. is also likely to push for new laws requiring companies to store customer data within the U.S. if it decides it can’t legally compel organizations to surrender data stored overseas.