According to Roland L. Trope, an attorney with New York City's Trope and Schramm, users of Google Docs could easily find themselves frozen out of their own documents if Google closed their account for some reason, or simply deleted the files by accident.
Trope noted that Google's terms of service for Google Docs gives Google the right to disable a user's account without providing copies of the data the user has stored on its computers. Google could also lose the data without suffering any prejudice, according to those same terms of service.
Section 14.1 of the Google Docs terms of service note specifically that:
YOUR USE OF THE SERVICES IS AT YOUR SOLE RISK AND THAT THE SERVICES ARE PROVIDED "AS IS" AND "AS AVAILABLE."
In other words, don't come crying to us if we've somehow gotten between you and your precious documents.
This could be a pretty serious issue during the discovery phase of litigation, when parties are obliged to hand over documents that are relevant to the case at trial.
Another potential legal pitfall of cloud computing is that Google (and other SaaS vendors) maintain data centers in foreign countries. That could create problems if relevant U.S. law contradicts laws that local magistrates hold dear.
Ralph Losey, a prominent lawyer involved in e-discovery, noted during a symposium on document management hosted by EMC, that European and U.S. courts have already locked jurisdictional horns over issues like privacy.
Losey warned that customers could end up paying hefty fines to U.S. courts for failing to comply with subpoenas that foreign courts ignore.
Losey has some pretty interesting examples of how litigants try (and usually fail) to get around e-discovery requirements with "the dog at my hard drive" type excuses. "The Internet ate my homework" isn't likely to fare any better.
This doesn't mean that companies shouldn't use Web-based services like Google Docs, but it does mean understanding the risks and putting governance policies and applications in place to ensure that they're not running unnecessary legal risks.