Microsoft says it snooped on Hotmail to track leaker of company secrets

Attendees at the National Retail Federation visit a Microsoft display. (AP / Mark Lennihan)

LOS ANGELES -- Microsoft Corp., which has skewered rival Google Inc. for going through customer emails to deliver ads, acknowledged Thursday it had searched emails in a blogger's Hotmail account to track down who was leaking company secrets.

John Frank, deputy general counsel for Microsoft, which owns Hotmail, said in a statement Thursday that the software company "took extraordinary actions in this case." In the future, he said, Microsoft would consult an outside attorney who is a former judge to determine if a court order would have allowed such a search.

The case involves former employee Alex Kibkalo, a Russian native who worked for Microsoft as a software architect in Lebanon.

According to an FBI complaint alleging theft of trade secrets, Microsoft found Kibkalo in September 2012 after examining the Hotmail account of the blogger with whom Kibkalo allegedly shared proprietary Microsoft code. The complaint filed Monday in federal court in Seattle did not identify the blogger.

"After confirmation that the data was Microsoft's proprietary trade secret, on September 7, 2012, Microsoft's Office of Legal Compliance (OLC) approved content pulls of the blogger's Hotmail account," says the complaint by FBI agent Armando Ramirez.

The search of the email account occurred months before Microsoft provided Ramirez with the results of its internal investigation in July 2013.

The email search uncovered messages from Kibkalo to the blogger containing fixes for the Windows 8 RT operating system before they were released publicly. The complaint alleges Kibkalo also shared a software development kit that could be used by hackers to understand more about how Microsoft uses product keys to activate software.

Besides the email search, Microsoft also combed through instant messages the two exchanged that September. Microsoft also examined files in Kibkalo's cloud storage account, which until last month was called SkyDrive. Kibkalo is accused of using SkyDrive to share files with the blogger.

Kibkalo has since relocated to Russia, the FBI complaint says.

Frank said in his statement that no court order was needed to conduct the searches.

"Courts do not issue orders authorizing someone to search themselves," he said. "Even when we have probable cause, it's not feasible to ask a court to order us to search ourselves."

Hotmail's terms of service includes a section that says, "We may access or disclose information about you, including the content of your communications, in order to ... protect the rights or property of Microsoft or our customers."

Redmond, Wash.-based Microsoft has taken a defiant stand against intrusions of customer privacy, in the wake of National Security Agency systems analyst Edward Snowden's revelations of government snooping into online activities.

General counsel Brad Smith said in a blog post in December that Microsoft was "especially alarmed" at news reports of widespread government cyber-spying.

Microsoft also has a long-running negative ad campaign called "Scroogled," in which it slams Google for scanning "every word in every email" to sell ads, saying that "Google crosses the line."