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To store or not to store - the pitfalls of using consumer cloud storage for business

Cloud-based document storage services have rapidly risen in number and popularity since the early days of DropBox in 2007. However, their popularity in the consumer context does not necessarily mean that it is a good idea to use them in business – or at least not without being aware of the legal issues.

Principal legal issues

A user’s position on many of the legal issues will be dictated by the cloud provider’s terms and conditions, privacy policy, and security policy. The terms sometimes differ between personal and business users, but in any event users are strongly recommended to read each of these documents, with a particular focus on:

  • ownership and use of user content: users should ensure that they retain ownership of the content they upload, and that the provider’s right to use such content is sufficiently limited.  
  • IPR infringement: most providers reserve the right to suspend or terminate an account where users upload content for which they do not have the necessary intellectual property rights or licences. Some reserve this right where intellectual property infringement is just alleged, meaning that you could potentially lose content without having done anything wrong - so back it up locally.
  • data protection: where user content includes individuals’ personal information (e.g. names or contact details), the uploading user must comply with data protection legislation. This includes ensuring that such information is not transferred outside the EEA unless the recipient agrees to provide the minimum level of protection afforded by EU legislation. Many cloud providers host user content from the US: users should therefore ensure that the provider warrants that they, and their subcontractors, will maintain user content in line with such minimum level (for example, as part of the US-EU Safe Harbor framework).
  • data loss, destruction, deletion, or corruption: providers often reserve the right to terminate for any reason whatsoever (illegal or not), and almost invariably disclaim all liability for loss or corruption of user content. So, again, back-ups are crucial.

Changing legal landscape

With a new European Data Protection Regulation on the way, users may find that providers offer greater protection of, and clearer information about, their content. However, the Regulations are presently far from agreed and are continuously changing: until they are finalised, the precise benefits for users of cloud storage services will not be clear.


As with any online service, security is a prime concern; this is even more the case where business documents are being stored remotely in a commoditised service. Given what a security breach can do to client relationships, this is not just a legal issue, but very much a commercial one as well.

Cloud providers do of course take steps to improve security. Users are encouraged to use strong passwords, and some providers (e.g. DropBox) have added 2-step authentication i.e. password plus a code that is sent to a “trusted” device. In addition, many providers protect content during transfer from the user’s to the provider’s servers (“in flight”) using SSL, then encrypt it when it arrives (“at rest”) using 256-bit AES encryption (the same standards used by the US government to protect “Top Secret” information). Layered over this, of course, is stringent physical security around data centres themselves.

However, for all these protections, providers will almost invariably use their terms and conditions to disclaim all liability for loss or theft of data, and will further reserve the right to disclose content to law enforcement agencies and other third parties when required by law or legal order (such as a subpoena or court order). In doing this, some providers will also remove the AES encryption protecting your content, enabling the recipients to review content in its entirety. The threshold required to trigger disclosure varies between providers, with some (DropBox) requiring only that it is “reasonably necessary” to disclose your content, whilst others (Microsoft SkyDrive – soon to be “OneDrive”) have expressed that they will fight such court orders. Nonetheless, US-based providers may well be obliged to disclose information to the US government under the Patriot Act regardless of confidentiality obligations in terms and conditions.

Users should be aware of the level of security applied by their provider, and fully understand when their content is liable to be disclosed to other parties. The security safeguards utilised by providers will in most instances protect content and satisfy data protection legislation, but market standard terms and conditions mean that if the provider’s security does fail for whatever reason, users will find that they are solely liable for any data loss. So, if you want increased security over your content, it is advisable to encrypt before uploading it – or not upload it at all.

To use or not to use

In summary, before using cloud services for document storage in business, the legal framework governing those services should be fully understood. If nothing else, remember that content in cloud storage should always be backed up locally, regularly and in full, and the most sensitive information should be encrypted and/or not uploaded at all.



  • Read the supplier’s terms and conditions, privacy policy, and security documents before uploading content
  • Use strong passwords (letters, numbers and other characters)
  • Secure sensitive content using your own encryption before uploading it
  • Regularly back up your content to a local hard drive


  • Upload another person’s intellectual property without the necessary rights
  • Leave content in your account for longer than is necessary
  • Forget to enable and use additional security features, such as 2-step authentication


  • Who owns your content, and how is the supplier permitted to use it?

  • Is your content being stored outside the EEA, and if so will the provider protect your information to the minimum standard required under EU legislation?

  • In what circumstances can your account be suspended or terminated?

  • What security mechanisms are in place to protect your information both in flight and at rest?

  • When will your content be provided to third parties, and will it be decrypted?

This article was first published in Chartech Magazine.
For further information, please contact Chris Hill .