Microsoft is currently in a legal battle with the Department of Justice over its refusal to turn over emails that the DOJ claims are pertinent to a criminal investigation. The emails are from a defendant who is involved in a narcotics case. The problem is that they are held on a server in Ireland and reside with a foreign business unit of Microsoft. Now Congress may be getting into fixing this problem.
At issue is whether the DOJ can issue warrants to Microsoft, a U.S. company, in regards to property that it owns in a foreign country. Recently, a New York judge ruled against Microsoft, saying that the DOJ did have the right to subpoena the emails. The case has far-ranging implications, especially in the wake of the NSA scandal, and will almost certainly make its way to the Supreme Court.
Microsoft maintains that, since the information in question resides in a foreign jurisdiction, the DOJ has no claims to issue warrants against it — essentially, it belongs to a subsidiary of Microsoft in Ireland. Microsoft has brought up the Electronic Communications Privacy Act in its defense, saying that it would violate many international laws and treaties and would give the US government power to search its property anywhere in the world. The case brings up many legal issues — but also many economic, business and privacy issues as well.
Many foreigners are already wary of the U.S. government’s power over U.S.-based tech companies. With the NSA’s PRISM scandal and many stories of tech companies cooperating with the NSA, many foreigners already look at tech companies with a cautious eye.
The European Commission, along with most European countries, already have stringent privacy laws, and putting U.S. companies in a position of violating local laws greatly harms their ability to do business overseas.
The economic ramifications are large as well. According to the latest ACI ConsumerGram, high-tech services and applications are valued at $2 trillion per year, with the U.S. exporting technical equipment valued at $76 billion every year. The cloud services, like the one that Microsoft operates, are a $174 billion business. But the industry is more than just Microsoft. Other U.S. cloud businesses included Amazon, Salesforce, Google, IBM, Rackspace and many other giants. If European regulators or consumers feel threatened, it could do major damage to the U.S. tech industry by imposing sanctions and not inviting U.S. firms to bid on contracts.
One study, by the Information Technology and Innovation Foundation, found that a privacy backlash could spark a $35 billion dollar loss in the cloud industry, and Forrester Research estimated that the financial losses spilling into other sectors becoming as high as $180 billion. Using Bureau of Economic Analysis numbers, the financial losses could result in 2 million lost US jobs. As the ACI ConsumerGram points out, we’ve already started to see some backlash to the NSA scandal — many large U.S. tech companies, like IBM and Verizon Communications, were shut out from bidding on international contracts. Alternatively, foreign governments could compel foreign companies operating in the U.S. to collect send personal information on U.S. citizens and send it back overseas.
Last Thursday, Senators Hatch, Coons and Heller introduced the Law Enforcement Access to Data Stored Abroad Act to address this issue by limiting the reach of warrant to U.S. citizens and companies, as well as keeping some conformity with foreign treaties and laws. Congress should give this bill its full and immediate consideration before the negative economic consequences of the DOJ’s actions harm U.S. interests abroad.
If the U.S. wants to maintain its tech dominance, both American and foreign consumers need to have peace of mind that there are some limits to the U.S. government’s intrusions on the privacy of consumers living overseas. American and foreign consumers need to have trust in U.S. tech companies, otherwise it could spell disaster for the sector both at home and abroad.
Zack Christenson writes on digital tech issues for The American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information, visit www.theamericanconsumer.org.