Handy summary from Michael Parekh:
Although the government request in THIS instance does not seem to invade specific individual privacy rights (as Yahoo! has maintained), the larger issue is one of the "slippery slope".As I read my email on Google's Gmail with sponsored ads on the right on the VERY subject of the emails I'm reading, I must admit this issue does give me pause.
Most mainstream Internet users are probably OK with trading some of privacy by trusting Google, but it's a VERY fragile trust at this EARLY stage of living more and more of their life online.
And what the government is doing in this instance, IS NOT helping.
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