The situation in the following post has been resolved for now. Dropbox has taken everyone's outrage seriously, and has fixed the problem. More information here. I am leaving this post and the follow-ups up because it contains a good deal of information on how to protect yourself and your intellectual property when working in the cloud.
As of Sat, July 2 2011, Dropbox has joined Facebook and who-knows-how-many-other ass-backward companies in declaring eminent domain on their user's data. That's right, boys and girls, if you're using Dropbox for storing your manuscripts, photographs, creative works, etc., you should know that their revised TOS says that:
you grant us (and those we work with to provide the Services) worldwide, non-exclusive, royalty-free, sublicenseable rights to use, copy, distribute, prepare derivative works (such as translations or format conversions) of, perform, or publicly display that stuff to the extent we think it necessary for the Service.
In other words, they own your stuff.
Not that this would stand up for a minute in court--but do you want to be a test case?
That right there is bad enough--almost, but not quite as bad as Facebook claiming copyright to anything you post, link to, etc. (and using everything you post in their advertising), but Dropbox does one better. Lest you say "Haha! I've dodged a bullet! I only use dropbox to hold my ebook collection, or to sync my porn files and music between my home and office systems!" you better read on. Following on from the same place in the TOS:
You must ensure you have the rights you need to grant us that permission.
In other words, if you put something you legally bought for your personal, non-infringing use, you've just been made a felon, because Dropbox now requires you to grant them worldwide license (including derivatives!), by uploading a file you didn't author (for a personal backup or so you can have access to it on a business trip, say) you've just granted rights to Dropbox that you don't own. But by uploading it, you're representing that you do have the right to grant those rights, therefore you're committing fraud as well as several sorts of infringement.
I'm not a lawyer, but I can't see how in the world this will hold up in court--but I'll tell you one thing: I ain't ever using this bloody service again. And I'll go one further--with shit like this getting to be de rigeur among clueless tech companies and their equally stupid lawyers, there's no way in hell I'm ever using a cloud-based archiving service that "reserves the right to change the TOS without notice" again.
As The Specials once said, you can't fight corruption with card tricks--they use the law to commit crimes.
Folks at Dropbox should be ashamed--and they should probably be sued. You guys at the EFF, are you listening?
Full text of the grotesque new Dropbox TOS here.
For an explanation of why the wording of this license is pissing me off, read my Contracts post Everybody Knows Peggy Lee (or should) which explains what's implied by license wording such as the above--regardless of whether it's couched in language that says "We only want these rights so we can perform the service."
Check out the comments below for more addenda--I'm posting updates as people feed them to me, and it's easier to add a comment than to edit the post over and over.
Another further Addendum:
I've got a new post talking about the factors in selecting an off-site backup service, the basics of data security, and discussing some alternatives to dropbox. Find it here.
Yet Another Addendum:
There are more updates on the Dropbox situation at my new blog post here.
As mentioned at the beginning of this post, Dropbox has taken everyone's outrage seriously, and has fixed the problem. More information here.