What Microsoft won't tell you about Windows 7 licensing

What Microsoft won't tell you about Windows 7 licensing

Summary: If you're not a lawyer, the subject of Windows licensing can be overwhelmingly confusing. Over many years of studying this stuff, I have learned that Microsoft has buried much of this information in long, dry license agreements and on sites that are available only to partners. Microsoft hasn't assembled this information in one convenient place, so I decided to do the job myself, gathering details from public and private sources.


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Upgrade versions

Let's assume you have a machine with Windows installed on it. Maybe you bought it preinstalled from a PC maker. Maybe you upgraded a previous version (like XP to Vista or Vista to Windows 7). Maybe you built it yourself with a full retail license. Whatever. Now you want to upgrade. You have two options.

Windows Anytime Upgrade This option is exclusively for people who already have Windows 7 Starter, Home Basic, Home Premium, or Professional installed. This might be the case if you get a great deal on a new PC with a specific edition of Windows 7, such as a netbook running Windows 7 Starter or a notebook running Windows 7 Home Premium. You now you actually want a more advanced version, but the PC is preconfigured and can't be customized. That's where Windows Anytime Upgrade comes in. You can use this option to replace your edition with the one you really want, with the features you need.

I did a complete walkthrough of the Anytime Upgrade process a few months back, and the process has not changed substantially since then. It is very quick (10 minutes or less, typically) and does not require any media. You kick off the process from the System dialog box in Control Panel and then enter a valid key for the edition you want to upgrade to. You can purchase a key online or use a key from any upgrade or full edition of Windows 7. The starting version must be activated before Windows Anytime Upgrade will begin.

When the upgrade completes, you are running the new, higher version. I have not tested the reinstall process yet. Officially, one would reinstall the original version and then use the Anytime Upgrade key to go through the upgrade process again. I am certain there are easier ways and will test them later.

Retail upgrade Here's the one that has caused all the recent controversy. A retail upgrade package is sold at a steep discount to a fully licensed retail product. The idea is that you are a repeat customer, and you get a price break because you already paid for a full Windows license earlier. Retail upgrades qualify for free technical support from Microsoft, even if the copy you're replacing was originally supplied by an OEM.

So who qualifies for a Windows 7 upgrade license? The Windows 7 retail upgrade package says "All editions of Windows XP and Windows Vista qualify you to upgrade." The same language appears on the listings at the Microsoft Store. Specifically:


  • Any PC that was purchased with Windows XP or Vista preinstalled (look for the sticker on the side) is qualified. This is true whether the PC came from a large royalty OEM or a system builder. You can install a retail upgrade of Windows 7 on that PC. You cannot, however, use the OEM license from an old PC to upgrade a new PC without Windows installed.
  • Any retail full copy of Windows XP or Windows Vista can serve as the qualifying license as well. If have a full retail copy (not an OEM edition) on an old PC, you can uninstall that copy from the old PC and use it as the baseline full license for the new PC.
  • Older copies of Windows, including Windows 95/98/Me or Windows 2000, do not qualify for upgrading. There was some confusion earlier this summer when a page at the Microsoft Store online briefly stated that Windows 2000 owners could qualify for an upgrade. This appears to have been a mistake.

So, who doesn't qualify for an upgrade license?


  • If you want to install Windows 7 in a new virtual machine, you need a full license. A retail upgrade isn't permitted because there's no qualifying copy of Windows installed. (The exception is Windows XP Mode, which is included with Windows 7 Professional and higher.)
  • If you own a Mac and you want to install Windows on it, either in a virtual machine or using Boot Camp, you need a full license.
  • And if you want to set up a dual-boot system, keeping your current version alongside your new copy of Windows 7, you need a full license. You can evaluate the new OS for up to 30 days before activating it, but if you decide to activate and use the retail upgrade full-time, you have to stop using your old edition.

That last one always surprises people, but it's right there in the upgrade license terms:


To use upgrade software, you must first be licensed for the software that is eligible for the upgrade. Upon upgrade, this agreement takes the place of the agreement for the software you upgraded from. After you upgrade, you may no longer use the software you upgraded from. [emphasis added]

So, if you want to dual-boot on a system that is currently using a single Windows license, you need to have a full license for your new copy, not a retail upgrade.

As the table on the first page indicates, you can transfer a retail upgrade license to a new PC. This fact confuses some people. Remember that the PC on which you install the upgrade must have a qualifying license first. So if you buy a new PC with an OEM Windows license, you can remove your retail upgrade from the old PC (restoring its original, un-upgraded Windows edition) and install your retail upgrade on the new PC.  This is covered in Section 17 of the Windows 7 license:


You may transfer the software and install it on another computer for your use. That computer becomes the licensed computer. You may not do so to share this license between computers.




According to wording on the retail upgrade media, "This [setup] program will search your system to confirm your eligibility for this upgrade." It is, presumably, looking for evidence of a currently installed version of Windows XP or Vista, although the details of exactly how it does that search are murky, to say the least. I've written briefly about this recently and will have much more on the mechanics of the process later, after I complete some testing and interview some Microsoft engineers.

Next page: Full and Volume License options -->


Topics: Microsoft, Hardware, Legal, Operating Systems, Software, Windows

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  • Wow. Thanks.

    This really clears up Windows licensing for me. I had been wondering about this and everything I could find seemed to be convoluted or written in legalese. Thanks again.
    • why is this so hard?

      This is the single biggest reason to move away from Windows. This should not be this complex or need explaining. It should be immediately obvious to me a consumer or consultant what is required to be legal, I should not have to research this issue, nor wonder if I'm in compliance. Simplicity.. It should not be this much work to know what is required. When a 4 page article is the "amazingly easy" solution to understanding licensing you have a problem. Why make it this hard to buy your products?
      • Ridiculous Comment

        We are all laughing!

        Oh, you didn't mean to be funny?

        All DRM license agreements are this complex (even downloaded music) -- they just are ignored. Microsoft is serious about their product rights so people HAVE to take note.
        • olny a fool

          "only a fool makes things more complicated"

          -Albert Einstein
        • Observe: the ideal licensing representation

          I'm going to show you two pages: one that shows the
          license terms, then one that shows the End User
          License Agree. I'm not so much asking you to read the
          license, but pay attention to it's presentation.

          First page:

          Second page:

          So... so why can't all firms do something like that?
  • thanks . . .


    Sadly, the retail still seems to be a pretty stiff price.
  • RE: What Microsoft won't tell you about Windows 7 licensing

    So, if I have a Mac with retail Vista Ultimate installed
    via BootCamp can I get the upgrade version of 7? Not
    entirely clear about that.
    • Yes

      If you already have a legal copy of Vista installed on any computer (PC, Mac, virtual machine), then you can upgrade it to Windows 7.
      Ed Bott
      • As long as one installs over the top of it and doesn't try to do adual-boot


        (More reasons not to support MS anymore - one can't even do a clean install with an upgrade license without doing a lot of shouldn't-be-necessary steps. And with Microsoft freely promoting piracy in other countries, why should anyone take their anti-piracy measures even remotely seriously, especially in the real world where one BIOS upgrade or video driver upgrade triggers the activation process, like we are a bunch of criminals or something... http://money.cnn.com/magazines/fortune/fortune_archive/2007/07/23/100134488/ (bottom of first page merrily reveals all:

        "Gates argued at the time that while it was terrible that people in China pirated so much software, if they were going to pirate anybody's software he'd certainly prefer it be Microsoft's.

        Today Gates openly concedes that tolerating piracy turned out to be Microsoft's best long-term strategy. That's why Windows is used on an estimated 90% of China's 120 million PCs. "It's easier for our software to compete with Linux when there's piracy than when there's not," Gates says. "Are you kidding? You can get the real thing, and you get the same price." Indeed, in China's back alleys, Linux often costs more than Windows because it requires more disks. And Microsoft's own prices have dropped so low it now sells a $3 package of Windows and Office to students."
        ) )

        Even $3 for them and $300 for us. How nice; that free market principle really being the latest "trickle-down" swindle...
        • Oh blah blah blah

          Microsoft sells a $29 copy of Windows to American students. But you are muchmore interested in FUD than facts.
          Ed Bott
          • Well, Ed, that's rude

            MS's predatory tactics are well known; facts are not FUD.
          • Ed is not interested in facts. He just shills for Microsoft. He's ignorant!

            No More Microsoft Software Ever!
          • $29?

            My bookstore sells Windows for around $100, depending on the version.
            Where can I get the $29 set?
          • For students

            Ed Bott
          • A lot of of college students are not eligible...

            You must have an Email address ending in ".edu" to qualify. A great many of colleges don't issue email addresses in the college domain. Mine doesn't.
          • A .edu address is not required

            That is the easiest way to get this offer fulfilled, but there is a specific set of procedures for qualifying if you university does not provide you wath an e-mail adress:

            Ed Bott
          • for students

            there is much better deal for windows 7 professional for $29.00 which I found at Microsoft's Ultimate steal.


            get their development software for free at

          • That's the exact same offer

            Just a different entry point and defaults to Professional instead of Home Premium.
            Ed Bott
          • FAke?

            I hate to say this, but this site looks like a fake. Or am I just too
          • Not a fake

            If you start at the link I provided, you will see that it all sponsored by Microsoft and run by third parties they contracted.
            Ed Bott