Is Microsoft changing its policy on System Builder licensing for Windows 8?

In a paragraph tacked into the end of last week's announcement of cheap Windows 8 upgrades, Microsoft appears to have made a significant change to its Windows licensing rules. What's really going on?
Written by Ed Bott, Senior Contributing Editor

Microsoft's Windows licensing policies are confusing and chaotic. Even Windows experts and Microsoft employees routinely get confused on the do's and don'ts of all the different packages.

That's especially true with the Windows OEM System Builder packages. When Windows 7 shipped, Microsoft made it very clear that this particular package is not authorized for installation by end users. They even went so far as to scrub their OEM partner website of previous comments that had specifically exempted hobbyists.

You can read the full background in these two posts:

This isn't a trivial difference, financially. Legally, the only option you have today for a home-built PC or a virtual machine on a Mac or PC is the Windows 7 Professional full packaged product (FPP). The retail price of that package is around $250. The OEM System Builder package of Windows 7 Professional is $140, or nearly 45% less.

So I was especially intrigued to read the final paragraph of Brandon Leblanc’s blog post on the Windows Team Blog last week. The topic was the announcement that upgrades for Windows 8 Pro would be a flat $40 for anyone with an underlying license of Windows XP, Windows Vista, or Windows 7. But then he added this comment:

Oh, and by the way - if you’re not upgrading from a prior version of Windows and are building your own PC or installing Windows 8 in a virtual machine or a separate partition, you will be able to purchase and install the Windows 8 and Windows 8 Pro System Builder product.

If that's true, it represents a massive shift in Microsoft's Windows licensing policies, and it would require a major change to the OEM System Builder license agreement.

Specifically, that license agreement as it exists today contains three requirements that prohibit the use of OEM System Builder software by end users:

  • The software must be installed on a “fully assembled computer system,” with a specific list of requirements (including a CPU, a motherboard, and a case).
  • The software must be installed using the OEM Preinstallation Kit (OPK). Although the discs that are included in the OEM System Builder package can be used to install the software directly, the license specifically prohibits this.
  • The computer system must be resold to an “unrelated third party.” If you're a consumer building for yourself, you don't meet the terms in Section 2, Authorized Distribution and Acceptance.

Microsoft has hammered home this message for at least four years.  See this "Licensing for Hobbyists" page, for example:

Licensing for Hobbyists (Microsoft.com)

It contains the following text:

There is a growing market for "do-it-yourself" home PC hobbyists who assemble PCs from components for their own use. Microsoft retail software licenses are the appropriate licenses for the do-it-yourself market. OEM System Builder software is not intended for this use, unless the PC that is assembled is being resold to another party. ​​​​​​​​​​​​​​​​​​​​​​

And in a Q&A section at the end, it specifically addresses one scenario that a lot of small- and medium-sized businesses dream of. If you buy hundreds of PCs a year, why not set up your own System Builder shop in-house? Under the current license terms, you can't:

Q. I would like to build PCs for my company and use OEM System Builder software for the operating system. Can I do this?

OEM System Builder software must be preinstalled and then resold to another party. If you are using the PC within your organization, this "resale" requirement will not be met. In addition, as a system builder preinstalling OEM System Builder software onto new PCs, this requires that you grant the end user license terms to the third party acquiring the PCs from you. If you are distributing the PCs within your organization, you can’t grant the end user license terms to yourself.

The burning question is this: Does this post constitute an announcement of an upcoming change in System Builder license terms? At one point, Microsoft officially sanctioned this use of System Builder software. It's possible that this use will be written into the license agreement for Windows 8.

Normally, I'm skeptical about this sort of change in policy, because I've been burned too many times before. But this type of announcement, on the official Windows blog, is generally vetted carefully by lawyers. So I'm cautiously optimistic.

A Microsoft spokesperson declined to comment, noting that the language of license agreements is not yet final.

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