Is it OK to use OEM Windows on your own PC? Don't ask Microsoft

Is it OK to use OEM Windows on your own PC? Don't ask Microsoft

Summary: If you go shopping online for Windows 7, you'll find OEM System Builder copies at significant discounts from full retail prices. Microsoft's own web sites and support forums give conflicting, confusing, often inaccurate information about these products. What's an honest consumer supposed to do?

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If Microsoft expects its customers to take license agreements seriously, it has a responsibility to communicate the terms of those agreements to its customers clearly and unambiguously. As I noted earlier this month, Microsoft does a generally poor job of explaining its complicated rules for how Windows licensing works. But I deliberately left one type of Windows license off that list, because it deserves its own special place in the Corporate Communications Hall of Shame.

I'm talking about OEM System Builder licenses for Windows desktop editions. If you look at any online shopping site that caters to PC enthusiasts, you'll find these copies displayed alongside the upgrade and full license packages that Microsoft says retail customers are supposed to buy. My friend and fellow Windows expert Paul Thurrott just posted a thorough look at the Windows 7 OEM System Builder package, complete with pictures. If you're building your own PC or looking for installation media that won't make you jump through hoops to install it, this product is extremely attractive, because it's significantly less expensive than a full retail license. The installation media works almost exactly like a full retail copy of Windows, except that it can't be used to perform upgrades, only a custom (clean) install. After installation, an OEM copy is essentially indistinguishable from a retail copy.

Many readers tell me they bought that software and installed it on their own new (or old) PC, happily saving a significant chunk of change in the process. According to Microsoft, they are violating the terms of the OEM System Builder license agreement, which says, in convoluted language, that you must install the software using the OEM Preinstallation Kit and then resell the PC to a third party. If you install that software on your own PC, you don't have a "genuine" copy of Windows.

But how are you supposed to know? Microsoft allows any online retailer to sell OEM System Builder software with no indication of its terms and conditions. A consumer is expected to read the license agreement printed in tiny type on the outside of the OEM System Builder software package and then translate its dense legalese into plain English (PDF here):

Once, not so long ago, Microsoft officially allowed hobbyists and Windows enthusiasts to use discounted OEM System Builder copies on new PCs built for personal use. Last year, in a post titled OEM licensing confusion starts at Microsoft.com, I posted pictures of official, Microsoft-produced documents that made this policy crystal-clear, in plain English. A document containing this graphic was available just last year, in fact: [Update: Some people reading this article seem a bit confused. The following language was not actually part of the Windows license agreement. Instead it was contained in official documents Microsoft distributed to help explain the license terms for its partners.]

But that document is now gone. In fact, over the past two years, someone at Microsoft has deliberately and methodically scrubbed all traces of those documents from the web. Only a few traces of that language have survived, as in this blog post from the Microsoft Small Business Community blog. They've been replaced with a single page at Microsoft's OEM Partner Center, which tries to stomp out the idea that end users can purchase and use this software. The Licensing for Hobbyists page, written for Microsoft partners and not for consumers, includes this Q&A, which was written more than a year ago:

Q. What is Microsoft doing to clarify these terms to resellers and end-users?

A. In addition to announcing this clarification to the System Builder channel, Microsoft is working with online retailers to post language on their websites explaining the licensing rules for OEM System Builder channel software.

Whoever was in charge of that effort has some 'splainin' to do, because no such language is available on any of the online retail sites I checked.

I used Microsoft's own "decision engine" to shop for a single copy of Windows 7 Ultimate, 64-bit edition. According to the Bing Shopping results, there are 21 online stores where you can buy this package, for prices ranging from $169.53 to $237.59. Bing's Cashback program offers an additional rebate of as much as 7% on those prices.

And here's the kicker: Those results show only OEM System Builder copies. When I tried to search for a fully licensed copy of Windows 7 Ultimate using Bing, I couldn't find it anywhere. Using Bing, I found upgrades and OEM copies only, neither of which can be legally installed on a newly built homebrew PC. I had better luck searching at Google, where I finally found a listing of 138 sellers offering the full Windows 7 package for prices that start at $280.92.

Following the links from those Bing results led to pages at ZipZoomfly.com and CompUSA.com and TigerDirect and CompSource. None of those pages contained any licensing information (not even a link to the Microsoft OEM license) and none of them showed the actual product package. The listing page at Newegg.com does contain the following disclaimer: "Use of this OEM System Builder Channel software is subject to the terms of the Microsoft OEM System Builder License. This software is intended for pre-installation on a new personal computer for resale…" But there's no way to actually read that license, and nothing discourages any consumer from buying it for personal use. That scenario was repeated on every site I visited.

If you're confused by all this information (or lack thereof), you might do what several would-be buyers did and visit Microsoft's Windows 7 forums, where you can get your questions answered by Microsoft support engineers and MVPs. These Microsoft Answers forums generally do a good job on technical questions. But there's no guarantee you'll get a consistent or accurate answer on licensing issues. The answer to this question, for example, seems to be 100% wrong:

Q: I have a small company and one of my clients has asked if I could upgrade several of their computers hardware and have inquired about me updating their computers to Windows 7.

In researching pricing for Windows 7 to give an estimate on cost for their requested computer work, I see that several places offer for purchase “OEM System Builder” software. The ‘OEM System Builder” is subject to “Microsoft OEM System Builder License” , can I purchase this OEM software or do I need to purchase the ‘full’ version?

A: Yes you can purchase the OEM version of Windows 7. The OEM versions of Windows have been available to the general public for many, many years and have worked without problems.

The main difference between OEM and Retail is that the OEM license does not allow moving the OS to a different computer, once it is installed.

Other than this, they are the same OS.

And here's another Q&A, asked and answered two days after Windows 7 was released last month:

Q: I build my own computers--mainly so I'll know what's in them and dont have to fool with the manufacturers' alleged "tech support" while I'm in warranty. At some point in the future I'll probably want to build one with Windows 7--when I do, do I qualify to use the "OEM System Builders" version or do I have to buy a retail copy?

A: Yes, you can buy the "OEM System Builders" version of Windows 7. Many online stores sell it.

That response was marked as an official Answer by the moderator of the forum, a Microsoft MVP.

So, to recap: A PC hobbyist or enthusiast who wants to buy a legal copy of Windows 7 at a discount gets confusing and conflicting information from Microsoft's web site. Microsoft's own "decision engine" leads him to software he isn't supposed to use, and even offers extra discounts if he buys through those links. He gets no information from online retailers who will happily take his money for a product he technically isn't allowed to install. And he gets absolutely wrong answers if he asks at Microsoft's official help forums.

Is that pathetic, or what?

A Microsoft spokesperson told me that the policy toward use of OEM software by home PC builders hasn't changed, and that the documents I found and pointed readers to for years were "mistakes." Sorry, that doesn't cut it. When you publish information on your website, and when you create glossy handouts that you distribute to your partners for years, those represent your policy. You can't suddenly change that policy by deleting copies of the old documents and pretending they never existed. That shows an appalling lack of transparency, not to mention a lack of respect for customers.

Normally, I'm a firm believer in following the letter and the spirit of software license agreements. In this case, though, given Microsoft's complete breakdown in communicating with its customers, I'm willing to make a major exception. I have no problem enthusiastically recommending these discounted copies of Windows for anyone building a PC for their own personal use. And I think someone at Microsoft should step up and formally approve that exception. It's the right thing to do.

Topics: Windows, CXO, Hardware, Microsoft, Operating Systems, Software, IT Employment

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354 comments
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  • who care

    if you're gonna put that much effort into it, you're probably just going to pirate the software to begin with.....
    caparthron
    • One is illegal the other isn't

      Simplification of the OEM terms and conditions came about as a result
      of the DoJ vs MS antitrust settlement, following a finding of fact that
      MS had abused it's market position with system builders.

      The best example was MS behaviour towards IBM for it's continued
      support of OS2.

      With the DoJ seemly lost any interest competition enforcement,
      presumably preferring the media circuit and long lunches, MS is wisely
      unwinding their commitment.

      I'm not one the pirates software, however the loops forced upon end
      user of MS software is enough to drive many to it. Funny watching it;-)
      Richard Flude
      • So the Microsoft police

        are in my trunk watching HOW I use my installations? LOL!
        Crestview
        • I suppose they could get an order for discovery

          from new egg or tigerdirect on who they sold OEM licenses to, in order to match up and see who bought what particular key, and then sue you, I guess. It would cost them more than it is worth to do all of that.

          Personally the more draconian MS becomes, the happier I am that I can dump their crap at home @ anytime, and not rely on it.
          Snooki_smoosh_smoosh
          • Typical MS idiocy.

            Why the hell do they want to punish people for
            building their own PCs? If anything they should be
            [i]happy[/i] about them, since they don't get bulk
            discounts like OEM retailers do. Why the need to
            penalize them further???
            AzuMao
          • Hobbyists should pay the same outrageous price

            Just like anybody else.

            Otherwise I'll continue to buy these discounted OEMs over at TigerDirect. Capice? ;)
            Wintel BSOD
          • While I agree that the prices for all versions of Windows are outrageous..

            ..the people making their own PCs definitely
            shouldn't have to pay an even [i]more[/i]
            outrageous price than the people buying prebuilts!
            AzuMao
          • Who said anything about that?

            Having hobbyists pay a higher price than the general public?
            Wintel BSOD
          • Microsoft did.

            Before, it was assumed that they had to pay a
            higher price just from the fact that buying an
            OEM license costs a lot more per-license than
            buying a bunch of OEM licenses in bulk like the
            retailers do.

            That alone already had hobbyists paying way more
            for Windows than the people who bought pre-
            builts.

            But now on top of that, Microsoft is saying
            hobbyists can't even use the OEM version, they
            have to buy an ultra-expensive version that
            costs even [i]more[/i]!
            AzuMao
          • then you could sue where you bought it from.

            Then they would in turn sue Microsoft for not issuing proper license agreements to them to properly disclose usage. then Microsoft would be force to stop distributing that type of software to store and only distribute full licenses to the store and start to loose more money that i would find funny.
            dougogd1
          • Sue? Are you daft?

            Those that are building their own home brew systems do not have the money required to sue newegg, tigerdirect, etc. Besides with Arbitration agreements in every transaction made in the US there is no recourse in law anymore . . . unless you are a corporation, because there is no arbitration agreement you have to sign.
            Ned Carter
        • Misguided

          So are you one of those people that think that crossing a red light is only illegal if a traffic officer sees you?
          rarsa
          • No, and he says so

            "given Microsoft?s complete breakdown in communicating with its customers."

            They haven't suddenly and with no warning changed the laws regarding traffic signals.
            Barc777
          • If the red light is covered by a brick wall so you can't see it..

            ..then sure.
            AzuMao
      • No Law is broken,

        and a license to which TWO or more parties have not identifiably and
        provably agreed to is not binding and does not have the force of law.
        Just because someone clicks the mouse doesn't mean there is a
        contract.

        If you buy a legal copy of some software, you can do what you want
        with it. They can call it a license if they want to, but it is really a sale.
        A contract can only be entered into by two properly identified,
        qualified people. Since an eight-year-old kid can buy and install
        Windows 7 on any computer he/she wishes, there cannot be a legally
        binding contract ever.

        That is why Apple has never gone after Hackintosh home builders To
        enforce their EULA, until Pystar has brazenly tried to make money on
        Apple's property. These greedy folks who are just spanked in court
        for distributing Apple's intellectual property, a clear violation of law.
        arminw
        • You missed a point:

          The fact that on this issue, Microsoft is acting and communicating in conflicting and contrary ways; making it impossible for the end user to be clear as to what their policy is, means that Microsoft would not and could not win a suit in a court of law.
          Unless of course, the opposing attorney was inept and irresponsible.
          satovey
          • "Microsoft is acting and communicating in conflicting and contrary ways"

            Wow! What a newsflash!

            This hasn't been known for decades already, no no
            no. This is totally new!
            AzuMao
          • lol!

            OK, I really did laugh about that, thank you AzuMao.
            In support, I will once again provide the following link:http://www.ecis.eu/documents/Finalversion_Consumerchoicepaper.pdf
            If you aren't a fan of the EU see also the US version from 2002: http://www.consumerfed.org/pdfs/CFA_tunney_comments_20020125.pdf
            914four
          • Very interesting paper!

            Thanks for the link. Very interesting paper. Never heard of theses guys (ECIS) before.
            thegerman
          • so why has anything change since then? nt

            nt
            dougogd1