This software is licensed, not sold.

That sentence, which has scrolled past PC users' eyeballs for decades as they click through Windows license agreements without reading them, is what made Bill Gates rich. It is also the gateway to an insanely confusing thicket of legal verbiage, and Microsoft has made the topic even more bewildering through the years by adding layers of anti-piracy protection that are only indirectly related to the license itself. (And let's not even start on weaselly words likegenuine.)

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I've been studying Microsoft licensing agreements for more than two decades. During that time, I've written dozens of articles on the subject and have prepared testimony as an expert witness in criminal and civil cases where Microsoft licensing was at the crux of some serious disagreements. One thing I've learned along the way is that even people who work for Microsoft sometimes get confused about when a license is legitimate and when it's not.

And if they have trouble sorting out license agreements, what chance do the rest of us have?

Most of the time, a Windows license is strictly a formality, something you can safely ignore. But occasionally, it matters, especially if you're building your own PC or upgrading to a different edition. If you're making IT purchases for a business that involves more than a few dozen PCs, it absolutely matters.

To make this difficult topic a little easier, I've put together a list of questions and answers focused specifically on Windows PCs. Is your license valid? How can you tell? Should you care?

Let's start with the most confusing one of all. What exactly is a Windows license, anyway?

What is a Windows license?

Let's start with what a Windows license isn't. The 25-character product key you enter to install or activate Windows is not a license. The Windows sticker on the side of your PC is not a license. A Windows DVD and certificate of authenticity, complete with hologram, is not a license. And the activation status message on your Windows PC is absolutely not a license.

All of those things are, potentially, evidence that you possess a valid license, which is a legal grant from the licensor (Microsoft) to the licensee (you) which gives you the right to use Microsoft Windows on a particular device, provided that you follow the terms of the license agreement. The license itself is an intangible thing, governed by a legal agreement between you and either Microsoft or one of its partners who resold the Windows license as part of a new PC. That license agreement is the thing you scroll through quickly without reading every time you install Windows.

Is my Windows license valid?

You almost certainly have a valid Windows license if you acquired it in any of the following ways:

• By purchasing a new PC with Windows preinstalled on it from a name-brand OEM.
• By buying a retail copy of Windows (in a physical box or as a digital download) directly from Microsoft or from a well-known software reseller.
• By acquiring a used or secondhand PC that came with Windows preinstalled.
• By purchasing or otherwise obtaining an upgrade license for a Windows edition directly from Microsoft or from a well-known software reseller.

But here's the most fascinating and frustrating part of Windows licensing. If I sit down in front of your computer and (with your permission) do a thorough inspection, I cannot conclusively determine whether you have a valid Windows license.

I can confirm that the system is properly activated. I can also make an educated guess about the license status, and I will probably be right. But without seeing an audit trail of receipts for the PC and/or its system software, there's no way of knowing for sure.

OK, how could I end up with a license that's not valid?

To quote Will Shakespeare, "Let me count the ways."

• You installed the product on too many PCs. When you buy a retail copy of Windows, it includes a license to install it on one and only one PC. If you manage to fool Microsoft's activation servers into accepting a second (or third, or fourth) installation of that copy, those extra installations are not properly licensed.
• You used an evaluation edition for a production system. Microsoft offers several subscription programs designed for developers and IT pros to evaluate its software and build test environments. A Visual Studio Professional subscription, for example, includes access to Windows desktop and server editions, complete with product keys. But those licenses are only valid for development and test purposes, not for production systems.
• You installed an enterprise upgrade without having a proper underlying license. Every so often I run across some poor benighted soul who announces that they're running Windows 10 LTSC (the Long Term Servicing Channel release). The only way to get an LTSC license is with a Windows Volume License agreement, which is ... not cheap. Enterprise licenses are widely pirated. If you're running Windows Enterprise edition and you can't tell me how you got the license, there's an excellent chance your license isn't valid.
• You bought a Windows product key from a random seller on the Internet. Even legitimate websites get fooled by shady resellers who advertise Windows 10 or Windows 11 Pro at a price that's too good to be true. Invariably, they're reselling Windows product keys that are part of an enterprise license or a Microsoft subscription. After they've collected enough cash, they disappear. Microsoft could block or ban those diverted product keys, but they might not notice. Do you feel lucky?

What's the point of Windows product activation?

If activation doesn't prove you have a valid license, why does it exist?

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We interrupt this story for some ancient history. Back in the late 1990s and early 2000s, software piracy was an existential crisis for Microsoft. Windows was the core of the company's business, and independent local PC builders represented a disproportionate share of the Windows business. Unfortunately, a depressingly large number of those resellers bought a single license and installed it on multiple PCs. Microsoft created a network of activation servers designed to flush out "non-genuine" copies of Windows to prevent that sort of flagrant copying of retail and system builder packages.

Hoo boy, did that go wrong. When I started at ZDNet, way back in 2006, I wrote a lot of words about the original Windows Genuine Advantage authentication software. I once called it "the stupidest thing Microsoft ever did with Windows."

I long ago lost count of the number of words I wrote about Windows Genuine Advantage and product activation, but I don't regret a single one of them. I know they made a difference. Microsoft removed the "kill switch" in Windows Vista Service Pack 1, and in Windows 7 the activation experience seems to finally work.

Over time, Microsoft discovered that it was in the company's best interests to tolerate a certain amount of casual copying as part of its goal of not pissing off legitimate customers. I can't remember the last time I received a complaint about product activation issues with Windows

Today, the overwhelming majority of Windows PCs are sold by giant OEMs that pay Microsoft for every license. Only a tiny sliver of PCs are built by hobbyists or small system builders. If someone in one of those groups tries to reuse a product key inappropriately (by activating multiple PCs using the same product key in a matter of days), the activation servers will object strenuously. But if you reuse a product key months after the first use, it's likely that Microsoft's activation servers will wave you right through.

Also: When Microsoft quietly rewrote its activation rules for Windows 10

Do I really need a product key?

If you bought a PC with Windows preinstalled, you don't need to enter a product key when you set it up for the first time. The company that built that PC entered the product key as part of the process of preparing the system for delivery to you. Big-name OEMs embed that product key into the BIOS. Smaller system builders enter the product key using deployment tools. In either case, once you start up your brand-new PC, accept the license agreement, and activate your copy, that product key is no longer necessary. You can reinstall that edition of Windows on the same hardware as many times as you want, without having to enter a product key.

So, when do you need a product key?

• If you're building your own PC, you need to enter a product key to complete activation.
• If you're upgrading an existing Windows installation to a different edition, you need to enter a product key to perform the upgrade and then activate the new installation.

That's it.

How much should a Windows license cost?

As my favorite Microsoft licensing expert, Wes Miller, is fond of saying, the answer to every licensing question is "That depends." This one is no exception.

If you purchased a PC with Windows preinstalled, the OEM who built the device paid Microsoft for the Windows license and passed the cost along to you. For a big OEM (think Dell, HP, Lenovo, ASUS, or Acer), the price list for Windows licenses is a closely guarded secret. I generally just figure that a license for Windows Home is built into the price of the PC and a Windows Pro license adds$50-100 to that total.

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Smaller PC makers who don't qualify to purchase licenses in bulk from Microsoft purchase licenses as part of the OEM System Builder program. The price for those shrink-wrapped packages is a little steeper, and the conditions of installation are more convoluted. But that cost is also built into the price of the PC. For my back-of-the-envelope calculations, I figure that this type of license costs about$30-50 more than the bulk price offered to the giants.

If you're building your own PC or creating a virtual machine for permanent use, you need to supply a license for use in that device, regardless of whether it's physical or virtual. In most cases, that means paying Microsoft (or one of its partners) for a retail license. You'll pay much more than a reseller for this privilege. On average, your back-of-the-envelope budget for a retail copy of Windows should be about$99 for Home and$149 for Pro.

You might be able to score better discounts than those, but if someone offers you a Windows Pro license for$29 or$49 or even$69, they're not legit. As the saying goes, if a deal sounds too good to be true, it almost certainly is.

Does Microsoft care whether my license is legal?

I have no doubt there is a junior lawyer in Microsoft Licensing, probably a recent grad from the law school of the University of American Samoa, who is obsessed with tracking down every Windows license that has even the slightest irregularity.

But those hard-liners are the exception, not the rule. Over time, Microsoft has discovered that its activation servers are most effective when they're configured to the most generous settings. If you used a product key six months ago, chances are it will work again, because there's little benefit for Microsoft in making it hard for you to reinstall Windows.

Microsoft occasionally audits its larger customers, but if you're a hobbyist or a small business, you're literally too small to bother with. If you can successfully activate your new Windows installation, it doesn't really matter if your license has some sort of technical flaw. The license police are not going to bust down your door and you should concentrate on your business, not on the esoterica of Microsoft licensing.

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