Vista Hands On #4: Clean install with an upgrade key

You probably heard or read about the "Vista upgrade loophole." Most of the reports I've seen have the basic facts wrong. The Setup feature they're describing isn't a loophole at all. It's a perfectly legal workaround for an amazingly stupid technical restriction that Microsoft imposes on upgraders. In this installment of my Vista Hands On series, I explain exactly what's going on and how you can legally perform a clean install using an upgrade key.
Written by Ed Bott, Senior Contributing Editor

I've been reading the breathless reports from other websites this week about the "Vista upgrade loophole." Most of it is typical echo-chamber stuff, and most of the reports I've read so far have gotten the basic facts wrong. The Setup feature they're describing isn't a loophole at all. It's a perfectly legal workaround for an amazingly stupid technical restriction that Microsoft imposes on upgraders. In this installment of my Vista Hands On series, I provide the background to help you understand exactly what's going on and how you can legally perform a clean install using an upgrade key.

Let's start with a few essential facts:

  • All retail copies of Windows Vista use the exact same media. The DVD contains all editions and can be used to perform a full installation or an upgrade. If you compare a full retail copy of Windows Vista Ultimate and an upgrade copy of Windows Vista Home Basic, you'll find that the installation media for the two products are virtually identical.
  • The product key included with the copy you purchase determines how the Setup program behaves. These behaviors are hard-coded into the Setup program based on the key you enter. Specifically, the Setup program is able to look at your key and use an algorithm to determine the edition it "unlocks." The same algorithm determines whether you are allowed to use that key for an upgrade or a clean install or both.
  • The license agreement for a Vista upgrade copy requires that the machine already be licensed for Windows. This license agreement does not restrict the method of installation in any way. Section 13 of the agreement reads as follows:
    • UPGRADES. 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.
  • When you run Setup with an upgrade key, the installer does not check to see whether you're really eligible. In fact, Microsoft's licensing infrastructure – the activation and validation servers it uses to check product keys against hardware hashes – does not (yet) contain any mechanism to match up your upgrade license with a previous license.
  • To use an upgrade product key, you must start the Vista Setup program from Windows 2000, Windows XP, or any edition of Windows Vista. Your previous version of Windows doesn't have to be activated. Even an evaluation copy of the edition of Windows Vista you purchased will allow you to run the Setup program with an upgrade key. (Remember that last part.)

Got all that? Good. Now let's put the pieces together.

I'm going to assume that you have a PC that came with Windows XP preinstalled by the PC maker. Any OEM version of Windows XP is eligible to upgrade to any edition of Windows Vista. So you purchase a retail upgrade copy of Vista Ultimate. In the box is a DVD and a 25-character product key.

You don't want to do what Microsoft calls an in-place upgrade, which preserves your installed programs and data files but has a greater risk of migrating your problems as well. Instead, you want to do a clean install. But there's a problem: Microsoft used a crude technique to make clean installs more difficult for upgraders. If you boot from the Vista DVD and enter an upgrade key, you'll see this error message and will not be able to go any further:

Windows Vista setup error for upgraders

Now, this restriction is stupid, because even Microsoft acknowledges that you can be legally entitled to purchase the upgrade version and yet have to do a clean install. (See the notes on Microsoft's official Windows Vista Upgrade Paths from Previous Versions page, for example, which says: "If you are currently using Windows 2000 Professional or Windows XP Professional x64, you are eligible for an upgrade copy to a corresponding or better edition of Windows Vista, but a clean install is required." Ahem.)

This silly technical restriction is not required by the license agreement. It's designed to frustrate anyone who wants to use the upgrade version on a new PC without an operating system and get them to pay more for a full version. But it's easily worked around.

Your easiest option – by far - is to use the PC maker's system recovery media to restore an image of Windows XP as it existed when you first got the computer, and then install Vista. I can hear the complaints now: "That copy is out of date. It's loaded with crummy, obsolete drivers and crapware." Yes, I know. That doesn't matter. Every bit of that junk will be erased soon enough. It will never get mixed with your new Vista setup.

After you finish restoring that original system image, start Windows, insert the Vista DVD, and run Vista's Setup program. Follow the steps I listed in Vista Hands On #2: A no-fuss, nondestructive clean install, this time using your upgrade product key. When you're done, use the Disk Cleanup tool to remove all traces of your old installation. You have a fresh, clean system and you are in perfect compliance with your license agreement.

What if you don't have a restore CD? In that case, you can install an evaluation copy of Windows Vista on the system, specifically to allow you to run Setup. Here's how:

1. Boot from the DVD and click Install Now.

2. Leave the product key box blank. Instead, click Next.

3. Click No in this warning dialog box.

Warning when entering no product key with Vista

4. From the list of Vista editions, choose the one that matches the upgrade you purchased.

Choose a Vista edition

5. Complete the installation, accepting all defaults.

Do whatever minimal steps are required to start your new installation for the first time. Wouldn't it be nice if you could enter your perfectly legal, fully paid-for product key now and just make the installation complete? Sorry, you can't do that.

Instead, you need to run Setup again, this time from within Windows Vista. Don't choose the Upgrade option unless you want to spend an hour or two migrating your nonpersonalized default Vista settings. Instead, do a nondestructive clean install. When that's done (it should go very quickly), use the Disk Cleanup tool to blow away the redundant installation in Windows.old. You're now good to go.

Now, was that a loophole? No. You satisfied every condition of the license agreement and aren't skating by on a technicality. The fact that you have to use a kludgey workaround to use the license you've purchased and are legally entitled to is Microsoft's fault.

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