Microsoft says it snooped on Hotmail to track leak

I've got to side with Microsoft on this particular instance. They weren't doing a blanket search as it was targeted at a specific user who had acquired proprietary information. Microsoft also only searched the services they own. If you're going to use their services, you're going to have to abide by their terms of service.

This still doesn't explain why I had a "hack" into my Live account only last week with the attacker's IP address being Hotmail's own network.