How the new Windows 8 license terms affect you

What's changed in Microsoft's radical new license agreements for Windows 8? I've got full details about how you can transfer Windows to a new PC, downgrade rights, and who qualifies for upgrades.
Written by Ed Bott, Senior Contributing Editor

I’ve had a chance to inspect the new, radically revised Microsoft license terms in advance of their October release. Earlier this week, I noted the two big surprises: All of the agreements are written in plain language that’s surprisingly easy to understand, and Windows 8 will, for the first time ever, include a new Personal Use License that explicitly permits retail customers to install and run OEM System Builder software. The overpriced full package products will not exist for Windows 8.

The new language in these agreements really is simpler than in previous editions. But there are still areas where confusion can arise. To forestall that confusion, I decided to put together a more comprehensive look at the new license agreements.

I have spent two full days going through these documents line by line, comparing them to each other and to the corresponding Windows 7 versions. I’ve also been listening to your questions, several of which are incorporated here.

If you are interested in details of how to transfer a Windows 8 license between PCs, see page 2 of this post. Page 2 also contains details about the rules for installing Windows 8 in a virtual machine and about downgrade rights.

This post is based on the contents of three new documents with the following headings:

  • MICROSOFT SOFTWARE LICENSE AGREEMENT (aka Personal Use License for System Builder, referred to in this post as “PUL”)

I looked at Windows 8 and Windows 8 Pro versions of each license agreement.

Two additional documents are related, but not included in this analysis. I have not yet determined whether there are changes to the terms that System Builders must follow when assembling a PC for resale. Nor have I been able to examine final versions of the product use rights that apply to Volume License editions of Windows 8.

The information in this post covers the vast majority of circumstances that consumers and small businesses will encounter when buying and deploying Windows 8.

Just what is a Windows license?

In the broadest terms, a license agreement is a contract between you and Microsoft Corporation (if you purchased the software and installed it yourself) or between you and the computer manufacturer or software installer that purchased Windows 8 from Microsoft and then installed it on a computer you purchased. The agreement describes your rights to use the Windows 8 software and any Windows apps that are included with Windows 8.

Your proof of license for a PC you purchase with Windows already installed consists of all of the following elements:

  • A genuine product key;
  • Successful activation of the software;
  • An authentic Windows label such as a Certificate of Authenticity (COA), which must be affixed to the computer or appear on the manufacturer’s or installer’s packaging or peripherals when purchased; and
  • Proof of purchase from a supplier of genuine Microsoft software.

For software you purchase in a physical package, the proof of license is “the genuine Microsoft certificate of authenticity label with the accompanying genuine product key, and your proof of purchase.”

For downloads from Microsoft or an authorized reseller, the proof of license is “the genuine Microsoft product key … you received with your purchase, and your proof of purchase from an authorized electronic supplier of genuine Microsoft software.”

What are the differences in the license agreement between Windows 8 and Windows 8 Pro?

The basic terms of the license agreement are identical between Windows 8 (the base version) and Windows 8 Pro. I found only three substantive differences: Restrictions for Client Hyper-V (a Pro-only feature) are in the Pro agreement and not in the base version. You can run Windows 8 Pro on a PC with two physical processors; Windows 8 is limited to a single CPU (although the number of cores is unlimited). And Windows 8 Pro supports Remote Desktop as a client and server, whereas Windows 8 is a Remote Desktop client only.

In the case of PCs purchased with Windows 8 Pro preinstalled by the OEM, downgrade rights are available. See page 2 of this post for details.

What PCs are eligible for a Windows 8 upgrade?

Upgrade software typically costs less than the fully licensed System Builder versions, reflecting the fact that you have already paid, directly or indirectly, for a previous Windows license. Although Microsoft has not announced final Windows 8 pricing, it's reasonable to assume this will continue to be true.

Your PC qualifies for an upgrade if it has a valid license for Windows XP, Vista, or 7. If the PC came with any edition of Windows XP or Windows Vista or Windows 7 and has a certificate of authenticity sticker affixed to it, it’s eligible for a discounted upgrade. (From October 26, 2012, through January 31, 2013, the upgrade price for Windows 8 Pro, purchased directly as a download from Microsoft, is $40. That price includes a separate download of the Media Center Pack, which will subsequently be a separate purchase.)

Microsoft has not announced pricing for System Builder editions, nor has it hinted at what the cost of upgrades will be after the initial promotion ends on January 31, 2013.

Note that upgrade eligibility has nothing to do with the operating system currently installed on the system when you go to perform an upgrade. If you have a previous Windows 8 preview version installed, that doesn’t confer any upgrade rights. That sticker on the side of the PC (or the CoA, if you installed a retail version) is the most important factor in defining the underlying license.

After I upgrade, can I use my old Windows version on a separate partition or on another PC? Can I give it away or sell it?

No. The upgrade replaces the old license completely. The terms are written in very clear language:

The software covered by this agreement is an upgrade to your existing operating system software, so the upgrade replaces the original software that you are upgrading. You do not retain any rights to the original software after you have upgraded and you may not continue to use it or transfer it in any way. 

Can I transfer my copy of Windows 8 to another PC?

That depends.

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Can I transfer my copy of Windows 8 to another PC?

That depends.

If you buy a new PC with Windows 8 already installed, your OEM Windows license is permanently bound to that computer. The only way you can transfer the license to another person is to sell or give away the computer itself, with its copy of Windows. The following terms apply:

The transfer must include the software, proof of purchase, and, if provided with the computer, an authentic Windows label such as the certificate of authenticity label including the product key. You may not keep any copies of the software or any earlier version. Before any permitted transfer, the other party must agree that this agreement applies to the transfer and use of the software.

If you purchase the software separately, in a package or as a download, the rules are much more liberal. Note that the text for the following rules is identical for retail upgrades and for System Builder software that you install on a PC you build yourself, or in a virtual machine, or on a separate partition. Emphasis in the following sections is in the original:

You may transfer the software to another computer that belongs to you. … You may not transfer the software to share licenses between computers.

In other words, you can remove the Windows 8 upgrade from an original PC and then install it on another PC, assuming the new PC has a license that qualifies it for an upgrade. Likewise, you can completely remove the PUL System Builder software from a self-built PC, a VM, or a partition and then install it in a new physical or virtual PC. 

There is no limit on the number of times you may do this type of transfer, providing you follow the rules I describe later in this section. That means hobbyists who like to tinker with PCs can relax. If you buy a System Builder copy, you can move (not share) that license from an old PC to a new one.

You may also transfer the software (together with the license) to a computer owned by someone else if a) you are the first licensed user of the software and b) the new user agrees to the terms of this agreement. To make that transfer, you must transfer the original media, the certificate of authenticity, the product key and the proof of purchase directly to that other person, without retaining any copies of the software.

In either case, one ironclad rule applies:

Anytime you transfer the software to a new computer, you must remove the software from the prior computer.

Note that these transfer rights apply only to Windows itself. The various ancillary packages Microsoft sells with Windows are tied to the machine for which they are purchased. Specifically:

You may transfer Get Genuine Windows software, Pro Pack or Media Center Pack software only together with the licensed computer.

Does Windows 8 include downgrade rights?

Windows 8 continues in the tradition of previous Windows versions. If you buy a new PC with Windows 8 Pro installed, the license includes the following terms:

Can I downgrade the software? Instead of using the Windows 8 Pro software, you may use one of the following earlier versions: Windows 7 Professional or Windows Vista Business.

This agreement applies to your use of the earlier versions. If the earlier version includes different components, any terms for those components in the agreement that come with the earlier version apply to your use of such components. Neither the manufacturer or installer, nor Microsoft, is obligated to supply earlier versions to you. You must obtain the earlier version separately. At any time, you may replace an earlier version with Windows 8 Pro.

Note that Windows XP is not a permitted downgrade.

These rights are similar to those available in Windows 7 Professional and Ultimate, Windows Vista Business and Ultimate, and Windows XP Professional, all of which allowed a licensed user to install and run a previous version of Windows in place of the licensed software.

And if you were hoping for a loophole that would let you buy one of those inexpensive $40 upgrades to Windows 8 Pro, which you could then use to downgrade to Windows 7 Professional, you are out of luck. Downgrade rights are not available for System Builder copies of Windows 8 installed with a Personal Use License or for upgrades from a preinstalled copy of Windows 8. The purpose of downgrade rights is for you to continue using an existing supported version of Windows when you buy a new PC with the latest version.

Volume License customers who purchase Software Assurance contracts from Microsoft will continue to have downgrade rights on systems they purchase that include Windows 8 Pro.

Can I legally install Windows 8 in a virtual machine?

Yes. You can install any version of Windows 8 in a virtual machine, using virtualization software on any platform. (If the VM is running a properly licensed copy of a recent Windows version, you can use the upgrade edition of Windows 8; in most circumstances, the PUL System Builder edition is the correct choice.)

Note that you cannot share licenses between the host PC and a virtual instance. The following text appears in section 1(f):

If you use virtualization software, including Client Hyper-V, to create one or more virtual computers on a single computer hardware system, each virtual computer, and the physical computer, is considered a separate computer for purposes of this agreement. This license allows you to install only one copy of the software for use on one computer, whether that computer is physical or virtual. If you want to use the software on more than one virtual computer, you must obtain separate copies of the software and a separate license for each copy.

Can I choose between 32-bit (x86) and 64-bit (x64) versions on the same PC?

With a valid license, you may use either 32- or 64-bit Windows, but you may install only one of those versions. The OEM license includes a lengthy bit of additional wording as a caution when switching from a factory 64-bit installation to a 32-bit version:

Installing the 32- bit version of Windows 8 on this system requires a change to the BIOS settings to legacy BIOS mode. If you switch back to the 64- bit version of Windows 8 from the 32-bit version of Windows 8, you should revert back to the original BIOS settings. If you do not revert back to these BIOS settings when switching back to the 64-bit version, the following Windows 8 functionalities will not work as they rely on UEFI mode boot:

  • Secure Boot,
  • Seamless Boot experience,
  • Network unlock for Bitlocker for computer with a Trusted Platform Module (TPM); and
  • eDrive support.

Reverting back to UEFI mode will require a hard drive reformat. All data and personal settings will be lost. It is highly recommended that you back up your data before you revert back to UEFI mode.

Who provides support for my copy of Windows?

If you purchase a retail upgrade or you install a System Builder copy under the terms of a Personal Use License, you receive support directly from Microsoft:

Microsoft provides limited support services for properly licensed software as described at support.microsoft.com/common/international.aspx.

If your copy of Windows was installed on a PC that you purchased, the PC maker is generally responsible for support:

For the software generally, contact the manufacturer or installer for support options. Refer to the support number provided with the software. For updates and supplements obtained directly from Microsoft, Microsoft may provide limited support services as described at support.microsoft.com/common/international.aspx. If you are using software that is not properly licensed, you will not be entitled to receive support services.

Retail upgrades of Windows 8 have a limited warranty of one year. On OEM PCs, Windows has a limited warranty of 90 days.

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