Last week, revelations were made regarding Microsoft’s (News - Alert) treatment of its online mail service, specifically Hotmail. Interestingly, the revelations arose due to the actions of a former Microsoft employee who was arrested for stealing and sending trade secrets to someone outside the company, a blogger based in France. Microsoft was alerted to this and took action by launching an internal investigation, which included searching the blogger’s Hotmail account.

This incident has kicked up quite a stir as it has people wondering how private their Hotmail accounts really are. According to Microsoft deputy general counsel and vice president of legal and corporate affairs, John Frank, people shouldn’t worry too much.

"In this case, we took extraordinary actions based on the specific circumstances," said Frank in a statement posted on Microsoft TechNet. "We apply a rigorous process before reviewing such content. In this case, there was a thorough review by a legal team separate from the investigating team and strong evidence of a criminal act that met a standard comparable to that required to obtain a legal order to search other sites."

In response, many have pointed out that Microsoft is not a law enforcement agency, despite its history taking down cyber attacks, and therefore has no right to search its customers’ e-mail accounts at will. However, according to Hotmail’s terms of services, Microsoft is allowed to do just that under “exceptional circumstances.”

Further, the terms of service agreement states that users agree that Microsoft may access, disclose or preserve users’ personal information and consent when the company thinks doing so is necessary to comply with the law, prevent death or serious injury, or protect the rights and property of Microsoft or its customers.

Due to the blowback over the situation, though, Microsoft has decided to change its policies somewhat. In particular, going forward, it will only conduct a search of customer email and other services if circumstances justify a court order. To make that assessment, Microsoft will consult an outside attorney who is also a former federal judge.

Because of this, Microsoft is actually ahead of Gmail, which Google (News - Alert) has stated users shouldn’t expect privacy with. And yet, it seems many have lost faith in Microsoft and Hotmail.