Exchange data store needs to be backed up

If you can plan it - close the exchange services and take a copy of the database and logs.
This is normally called an "offline" backup and does not require any exchange-aware software to backup or restore.

It is a simple file-copy process.
It is best to also copy (or image) your AD environment at the same time, so that mailboxes match to the AD names.

Depends on how you want to access it. If the database is not too large I would use exmerge for Exchange 2003 or the powershell cmd export-mailbox for exchange 2007

This way you will have every users mailboxes in .pst format which will be very easy to access. If you just take a copy of the database you will have to restore it or use expensive extraction software to get any information out of it.

Plus Exmerge and export-mailbox can be run during the day without interrupting the users.

When you say you need to back it up because of legal issues, are you saying that it may be related to a lawsuit, if so it may be a good idea to contact your legal team to ensure you have the proper data.

You can use ExMerge to export to PSTs, which would be more useful than handing over a database that would not be as useful.

If you don't want to use any Backup Software, just Dismount the Store and copy the .edb file to destination location it is called Offline Backup. If you are using any Backup Software take a Full Backup of Database to your desired location.

Ok, I've been using Exmerge for the past week and just completed the conversion of all mailboxes to PST.  However, I got some 7 gig mailboxes that converted to 2 gig pst.   Does 2003 exchange have a pst limitation?  Here's a snippet from the error log..

Errors encountered. Copy process aborted for mailbox 'User Name'

Vikaspal, will there be file permission issues when they restore the ebd file if I went that route?  Same question posed for a full backup...

Exmerge has a 2GB limitation yes. For larger mailboxes you need the to archive or you need to export to .pst from Outlook.
If you backup the full database what will they do with it? Will they have access to your servers? Or will they have access to a test version of your domain?
Permissions will not be the real issue. The issue will be that whoever has a copy of your exchange database can only restore it if they have access to your active directory. you can't just copy an edb file to another server and open it up.

They won't have access to the active directory.  We're wiping it out.  They may need to use the data if any legal issues come up.  So is this whole scenario done for without AD?

Well it becomes a lot harder yes. That is why I suggested .pst files, because you can open them easily. Exchange accounts are tied to the AD user accounts. If you want to access an edb file you need to either purchase some expensive software to extract it to .pst files or you need a backup of AD and you would have to restore the AD first, then build an exchange server and then restore the exchange database. Once exchange is restored you would still need to connect outlook to it to access the emails. This process could take 1-2 days of work.

Well, not the news I was hoping for.  I guess I can wipe my hands clean of it once copy the edb file and tell them they need to purchase the expensive software.  Do you happen to know the name of the software?