[EFF] Megaupload and the Government's Attack on Cloud Computing

But in addition, the government's approach should terrify any user of cloud computer services—not to mention the providers. The government maintains that Mr. Goodwin lost his property rights in his data by storing it on a cloud computing service. Specifically, the government argues that both the contract between Megaupload and Mr. Goodwin (a standard cloud computing contract) and the contract between Megaupload and the server host, Carpathia (also a standard agreement), "likely limit any property interest he may have" in his data. (Page 4). If the government is right, no provider can both protect itself against sudden losses (like those due to a hurricane) and also promise its customers that their property rights will be maintained when they use the service. Nor can they promise that their property might not suddenly disappear, with no reasonable way to get it back if the government comes in with a warrant. Apparently your property rights "become severely limited" if you allow someone else to host your data under standard cloud computing arrangements. This argument isn't limited in any way to Megaupload -- it would apply if the third party host was Amazon's S3 or Google Apps or or Apple iCloud.

The government's tactics here also demonstrate another chilling thing—if users do try to get their property back, the government won't hesitate to comb through their property to try to find an argument to use against them. The government also seeks to place a virtually insurmountable practical burden on users by asking the court to do a slow-walking, multi-step process that takes place in a far away court. Most third parties who use cloud computing services to store their business records or personal information are not in a position to attend even one court appearance in Virginia, much less the multiple ones the government envisions in its submission to the court.