Microsoft vowed to battle on in the case, which is being closely watched by Internet firms eager to assure users around the world that their private information is not being freely shared with US authorities.

"The only issue that was certain this morning was that the District Court's decision would not represent the final step in this process," Microsoft general counsel Brad Smith said in an email reply to an AFP inquiry after the ruling by US District Judge Loretta Preska.

"We will appeal promptly and continue to advocate that people's email deserves strong privacy protection in US and around the world," said Brad Smith.

Microsoft argued in court that the warrant, which would require the tech giant to turn over customer emails stored in a data center in Dublin, should be nullified because it would give US government excessive power to pry over private information.

A two-hour hearing ended with Preska denying Microsoft's request to have the subpoena quashed, according to a spokesperson for US attorney in New York.

The legal battle comes amid rising concern about US surveillance following revelations of snooping disclosed by former National Security Agency contractor Edward Snowden.

Leading tech firms, including Apple and Verizon, have filed briefs supporting Microsoft.

Microsoft has argued that the customer emails, sought in this case in a Justice Department narcotics probe, are entitled to the same protections as paper letters sent by mail.

That means prosecutors should only be able to access the information in the electronic 'cloud' with a warrant, and that the authority of such warrants ends at US border.

Smith also has publicly contended that the case could leave US citizen's privacy vulnerable to overseas prying if other counties opt for the same tactic.

But US Attorney Preet Bharara argued that under a 1986 law governing electronic communications, the tech giant is required to produce the data regardless of where Microsoft has decided to store it.

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