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US ruling on overseas cloud data presents challenges

Firms caught between governments' need for data and citizens' privacy
Thu Aug 07 2014, 14:10
US cloud firms could have to turn over data to US authorities, regardless of location

USE OF THE CLOUD is growing all the time, with firms ranging from construction companies to local councils looking to embrace the benefits that hosting data, services and infrastructure in the cloud provides.

However, it is not a simple journey, with issues of data security and sovereignty often causing concern for companies worried about where their data would be stored when "in the cloud".

Chiefly, this concerned the Patriot Act, which meant that any data hosted with US providers in the country could be sifted through by the authorities (although in light of the Snowden revelations such laws seem unnecessary anyway).

To try to allay these fears US companies such as Microsoft and Google have built data centres in regions such as Europe or Asia, so they can tell customers in these areas their data will remain beyond the US reach. Until now.

On Friday a US judge in New York handed down yet another decision that further tightens the nation's grip on its corporate IT giants, ruling that the US had the legal right to request data stored by Microsoft, regardless of location.

Microsoft has already said it will continue to appeal but having lost the case twice now many doubt it can stop the US government from getting its way.

The implications of all this for the cloud market are huge, as it would mean the location of a data centre is irrelevant, as the US can always gain access to data.

For many firms in Europe this could prove an unacceptable situation, as noted by Craig Newman, a lawyer with Richards Kibbe & Orbe.

"This type of ruling is going to open up a Pandora’s box of concerns by European countries," he said, having witnessed the decision being handed down, as reported by the New York Times.

Caught in the crossfire
Stewart James, partner at Ashfords LLP, told The INQUIRER the decision showed the legal tug-of-war taking place between governments and citizens over the right to access digital data.

"At issue is the balance between the legitimate needs of a state to detect, investigate and prosecute criminal, or even terrorist, activities, and the rights and expectations of individuals to the privacy of their communications,” he explained.

Caught in the middle of this battle are businesses that facilitate digital communications.

"Microsoft is not the only business interested in the outcome of this decision; Germany reportedly terminated a contract with Verizon citing concerns over US surveillance," James said.

"This emphasises the commercial importance of the decision and its potential to impact on national and even the global economy for data services."

Other major IT vendors have also thrown their weight into the case, with Apple and Cisco both submitting briefs to the court after the initial decision in April that sided with Microsoft. This appears to have had little effect, though.

"It is a question of control, not a question of the location of that information," Judge Loretta Preska said on Thursday in the ruling.

Case not closed
However, while location may be irrelevant to the US legal system, this stance could seriously hamper the development of the cloud sector, according to Kate Westmoreland, a lawyer and fellow at Stanford Law School.

"There are definitely downsides to an approach that uses data location as the basis for jurisdiction," she wrote in a blog post.

"One of these is that it would mean that companies will make decisions about data location based on legal priorities rather than technical needs, which could compromise the speed and robustness of new products."

However, Westmoreland said that, with Microsoft's appeal and plenty more legal debate to come, it is unclear exactly how this will all play out so it is too early to make any hard and fast judgements on the situation.

"This is not a case of good versus evil and today's ruling is not necessarily a bad thing. It might be, but it's just too soon to tell.

"If Judge Preska's decision survives the inevitable appeals, the most important thing will be the basis of her (and the appeal judges') reasoning."

As such, firms considering the cloud may indeed want to wait to see how the case pans out and how the legal land lies before embarking on any major projects.

To read more about cloud computing visit the Intel IT Center. µ


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