On July 6, 2006, Microsoft released Private Folder 1.0 as a reward for those who have managed to register their license of Windows XP using the Windows Genuine Advantage program. After a backlash from network administrators, Microsoft has now withdrawn the software tool, though it currently remains available from an unlinked page on the WGA site.

Private Folder was an unsupported software tool intended "to protect your private data when friends, colleagues, kids or other people share your PC or account," as Microsoft originally announced. After installation, a folder is created on the desktop, and all items stored in that folder are automatically encrypted and password-protected. Corporate network administrators responded quickly, claiming that the software made it too easy for people to store sensitive corporate data where companies couldn't see it, and that there was no "backdoor" for companies to retrieve data when users inevitably lost the password.

Since Microsoft has now withdrawn the utility, this will have to be seen as a black eye for the company, but Private Folder is hardly the only utility that provides the ability to encrypt or password-protect data. Most archival utilities used to create .ZIP files have the ability to password-protect archives, for example, and Apple's Mac OS X ships with a feature called File Vault which encrypts and password-protects a user's entire home folder.

Corporate administrators concerned about protection of data have far more serious things to worry about than Private Folder, even if it continues to be available. The backlash against this tool was unreasonable, and now those few users who want to use it (and can manage to get Microsoft to recognize their valid Windows license) cannot. Users who have — perhaps for the first time — thought of encrypting personal data on their work computers have many options available to them, and corporate administrators may be working overtime to try to plug the leaks. Including, presumably, removing all floppy disk, CD-RW, and DVD-RW drives, as well as USB and Firewire ports.

It would have been nice to see Microsoft explain reality to the critics of Private Folder, but given than it has taken so much heat lately over WGA, it is no surprise that they quickly retreated instead.