I hate MS as much as anyone else, but I don't have a problem with them doing this. Legally they have to comply if they have evidence in a legal action. Maybe they are at fault for not solely relying on the TPM, or not giving users informed consent about using the cloud, but I cannot fault them for not going to battle for civil liberties when they can't even implement notepad without screwing it up.

You absolutely can and should fault them. This is a choice they made.