In a decision that could have broad privacy implications, a federal court in New York Thursday ordered Microsoft to comply with a U.S. government demand for a customer's emails stored on a company server in Dublin, Ireland. The decision upholds an earlier magistrate court decision.

In an oral ruling, District Court Judge Loretta Preska rejected Microsoft's argument that a U.S search warrant does not extend beyond the country's borders.

"The production of that information is not an intrusion on the foreign sovereign," Courthouse News reported Judge Preska as saying. "It is incidental at best," Preska noted, adding that the magistrate court order was not an extra territorial application of U.S. law.

The judge however stayed the ruling to give Microsoft time to appeal.

In a statement, Microsoft general counsel Brad Smith said Thursday's ruling would not be the final say in the matter. "The only issue that was certain this morning was that the District Court's decision would not represent the final step in this process," he said. "We will appeal promptly and continue to advocate that people's email deserves strong privacy protection in the U.S. and around the world."

Microsoft's closely watched dispute with the government stems from a search warrant in December for one of its customer's emails. The government claimed it needed the information in connection with a narcotics investigation.

Microsoft refused to comply, arguing that the government cannot force U.S. tech companies to hand over customer data stored exclusively in overseas data centers. The company, like several others, including Verizon and Apple, argued that a customer's email stored in the cloud has the same constitutional protections as paper mail.

After a magistrate court quashed the company's opposition in April, Microsoft appealed, leading to Thursday decision.

In a blog post earlier this week, Smith said the case has broad ramifications for U.S consumers as well as businesses. "If the U.S. government prevails in reaching into other countries' data centers, other governments are sure to follow."

Already the British government has passed a law asserting its right to ask British tech companies to produce emails, regardless of where in the world it is stored. "This would include emails stored in the U.S. by Americans who have never been to the U.K," Smith said.

Hanni Fakhoury, staff attorney with the Electronic Frontier Foundation (EFF), which filed an amicus brief in support of Microsoft, said the decision was not unexpected.

"We suspected it would be hard to convince the district court to overrule the magistrate and that the Second Circuit [Court of Appeals] would ultimately have to decide the issue," Fakhoury said.

"I hope the Second Circuit looks closely at the magistrate's reasoning and realizes that its decision radically rewrote the Stored Communications Act when it interpreted "warrant" to not capture all of the limitations inherent in a warrant, including extraterritoriality," he said.

The dispute comes at a time when U.S. cloud service providers are fighting to reassure overseas clients that their data is safe from government access.

Edward Snowden's revelations about the National Security Agency's data surveillance activities have stoked widespread fears overseas about the safety of corporate data in the hands of U.S. cloud service providers. Some have predicted that the concerns could cost U.S technology companies tens of billions of dollars in lost business over the next few years.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan or subscribe to Jaikumar's RSS feed . His e-mail address is jvijayan@computerworld.com.

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