Microsoft and piracy: Try, try again

Customers will decide whether that's true later this year, when Microsoft delivers its first release of the new Whistler version of Windows, featuring "product activation," a revised version of anti-piracy technology that was widely criticized in Office.

Product activation requires purchasers of Microsoft software--whether they obtain the product at retail or preloaded on PCs--to "activate" the product, either by phone or the Internet.

When Microsoft (msft) issues its next test version of Whistler, the successor to Windows 2000, in the next month or so, a large number of testers will obtain first-hand experience with product activation. Word of the Windows product activation feature leaked out this week via a smaller group of Whistler testers, and many customers expressed skepticism about Microsoft's intentions.

Whistler isn't the only product slated to feature product activation technology. Microsoft also is planning to include the anti-piracy code in numerous other products on tap for this year, including Office 10, the successor to Office 2000; Visual Studio .Net; and Visio 10, said sources close to the company.

Microsoft executives said the company has made no decision whether to license product activation to other software makers who might be interested in the technology.

"We've looked at what other companies have implemented (as anti-piracy measures) and learned from that," said Allen Nieman, a Microsoft product manager for Windows.

Nieman acknowledged that Microsoft also learned lessons from its past mistakes. The company took its lumps a few years back with the original anti-piracy scheme it devised for Office.

Microsoft piloted product activation technology in seven countries, including the United States, when it launched the test and final versions of Office 2000.

Product activation, which is mandatory, is different from product registration, an optional process in which consumers provide their names, product information, and contact information.

Through activation, a Microsoft-run clearinghouse generates a random "installation ID." This installation ID is based on the product key used during setup and the hardware configuration of the PC, according to Microsoft.

The product activation technology detects the hardware configuration on which the product is being installed, but not through any kind of scanning of a customer's hard drive, Microsoft executives said. The technology does not register the make, model, or manufacturer of the PC or peripherals attached to it. Nor does it register any of the software applications loaded on the customer's machine, Microsoft said.

Consumers will be able to change their hardware without having to reactivate the product, unless they "completely overhaul" their machines, at which time, reactivation may again be required, according to the company.

With the product activation feature in Office 2000, Microsoft allows customers to install one additional copy of Office on their laptops--in addition to their desktops--but requires a second activation and verification of the license.

Future Microsoft applications are expected to be similar. Microsoft executives said the addition of new software or software components won't result in customers needing to reactivate, but an install on a reformatted disk of a product-activated product will require consumers to obtain a new ID.

All this sounds promising, but Microsoft still needs to win over skeptics, Gartner analyst Chris LeTocq said.

"It would be good for them to get third-party certification of the fact that they aren't collecting user data," LeTocq said, "but they probably don't want to risk that (product activation) algorithm being broken."

LeTocq added that Microsoft's product activation scheme is aimed at halting "casual copying" more than large-scale software piracy.

"Microsoft is in revenue-maximization mode right now," LeTocq said. "Casual copying by end users is what they're really fighting with this. And from a licensing standpoint, they have a right to do that."