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Heh, possibly. It just stunned me that they of all people were being that grabby.
In all honesty, those terms are probably set to they don't get sued for storing the information. Sadly, you can get sued for anything, so you have to cover your butt in every way, shape, and form.
Those terms are taken out of context!
The line before reads:
"Some of our Services allow you to submit content. You retain ownership of any intellectual property rights that you hold in that content. In short, what belongs to you stays yours."
Damn it, people... this isn't the issue. Nobody is saying Google is claiming ownership of your files, they are saying that you are giving Google a FREE LICENSE to do with your files as they wish. Two totally different things.
I was accepted today into Google Drive as well...reminds me of Google Docs.
tl;dr explanation of licensing and copyright, even though IANAL:
You have the copyright to anything you create. It's your intellectual property (IP is more than just copyright, but let's stick to copyright for now). You can license it out to people - this does NOT give them the copyright, it just allows them to use it under your terms.
What Google does is making you grant them an extremely permissive license for the use of your files. They do not get the copyright over your stuff, they just have a license that is so permissive that they don't need to hold the copyright anyway.
Interesting note regarding public domain: in large parts of the world there is no such concept as 'putting something in the public domain'. The difference between public domain and an extremely permissive license like WTFPL or CC0, is that when you put something in the public domain you actually relinquish your copyright, whereas when using WTFPL or CC0 you simply license out your stuff to anyone that wants to use it, and that does not make you lose your copyright.
EDIT: Yes, really, there are many countries that do not allow you to put something in the public domain. You have the copyright, whether you want it or not. WTFPL and CC0 are solutions to make it possible to do pretty much anything with it, much like when it would be in the public domain - but without having to actually put it into the PD.
Apparently they amended the TOS. That said, it's pretty much Google Docs.
There's the same legend there