"If MS lose the appeal, then it will effectively make using any cloud service with ties to the USA unusable, because you could face prosection at any time in the EU for violating the Data Protection laws, when the cloud provider hand over non-US data to the US Government without getting a valid EI warrant."
Even without the New York case: MS made it abundantly clear to my employers that if the PATRIOT act is invoked they would hand over data without hesitation - and this is something that most people haven't picked up in.
The NY court argument centres on whether "national security" is the only way such data handovers can be forced.