Microsoft wins appeal to protect overseas data.

• Position: CLOUD COMPUTING

In the closely watched case Microsoft Corp. v. United States, Microsoft has prevailed in its years-long power struggle with the U.S. government over when authorities can access the digital data that tech companies collect.

In the case, the U.S. Court of Appeals for the Second Circuit reversed a lower court's ruling that Microsoft must turn over a narcotics investigation suspect's e-mails that are stored in a Microsoft data center in Dublin.

The case attracted widespread attention because of its potential privacy implications for the growing cloud computing business, Internet e-mail, and online storage services, among others.

The Justice Department, which brought the case, had argued that Microsoft's status as a company based in the United States gave Justice the authority to obtain the data, even if the data was stored outside the country. While Justice argued that it needed the data access for security reasons, Microsoft invoked privacy rights.

Bradford L. Smith, Microsoft's president, called the court's ruling a win for digital privacy rights. He added that the adoption of cloud services by customers in some countries, especially in the public sector, had slowed as a result of the uncertainty around the privacy of their communications, the New York Times reported.

The government may appeal the ruling. In a statement, Peter Carr, a spokesman for the Justice Department, said, 'We are disappointed with the court's decision and are considering our options."

But the precedent has been set. Tech giants can use the ruling to argue against future attempts by governments to obtain data that is stored beyond their borders.

"The tech community is breathing a collective sigh of relief," said Craig A. Newman, a lawyer with Patterson Belknap Webb & Tyler. "Until this ruling, tech companies with data centers outside the U.S. were stuck in this proverbial rock and a hard place."

The case began in December 2013 after a search warrant was granted by a federal magistrate judge in New York as part of a criminal inquiry. In mid-2014, Microsoft challenged the search warrant, questioning...