U.S. District Judge Loretta Preska in Lower Manhattan said the technology company should surrender emails of an unspecified user even if the information was stored overseas. Microsoft argued that the government's warrant violated U.S. constitutional protections and that such warrants were only valid in the U.S.
"It is a question of control, not a question of the location of that information," Preska said in the ruling.
Judge Preska put the ruling on hold to give Microsoft time to appeal, which they did immediately.
"The only issue that was certain this morning was that the District Court's decision would not represent the final step in this process. We will appeal promptly and continue to advocate that people's email deserves strong privacy protection in the U.S. and around the world," said Microsoft's general counsel Brad Smith.
Microsoft also held that since the data is stored in Dublin, Ireland, it falls under the purview of Irish and European data protection laws.
The ruling means Microsoft and other tech companies like Apple and Facebook would have to hand over data irrespective of where it is stored as long as the company is based in the U.S.
Companies are worried customers and clients will take their business to non-U.S. competitors if they can't protect their privacy.