Curious, I walked to the guy’s table. His sign clearly states that he had a full version of Windows XP Professional with an installation key for $20.00. I was amazed to see that he was also selling a full version of Office XP Professional for a mere $10.00, when it retails for well over $500.00!

Now, I have friends that work for Microsoft and I know that Bill Gates himself can’t purchase the FPP of Windows XP Professional for $20.00. I picked up one of the CDs and asked the vendor, “What are you selling?”

His response was a curt, and a bit defensive, “Software.”

“Well, I realize that,” I answered, “but what kind of software?”

“What it says,” he replied. “It’s the operating system and the Office Suite.”

Pulling one of the CDs from the sleeve, I noted what appeared to be a CD Stomper label—the kind that you print on your Ink Jet printer at home. There was an installation key imprinted on the label. I recognized this key as a commonly distributed bulk licensing key that Microsoft includes with corporate license purchases (which I’ll discuss in more detail later). On the disc I examined, I could also make out a Memorex logo showing through the Windows XP label.

“How is this legal?” I asked.

“It’s legal. You don’t need a license. You won’t have to activate it. Just put the disc in your CD drive, install the operating system with the key on the front, and that’s it.”

Well — that’s not exactly it. . .

All Microsoft operating systems require a license which grants you the legal right to run or access the software program. This license governs your use of the program. Either you obtain this license by purchasing the FPP off the shelf in a store, or you get a license when a vendor pre-installs the operating system on a PC you purchase from them. You may also purchase upgrade licenses, but only for a PC that already has a licensed operating system installed. If you own a PC that does not have an existing full-version desktop operating system installed, you need to purchase the FPP version rather than an upgrade. You can also purchase bulk licenses for multiple installations within your organization (generally associated with a corporation or business). In the bulk installation case, you may purchase a single set of installation media to go with the licenses and install the software from a network location or from archive images (copies you make yourself) of the media. However, the PC must already have an installed full-version operating system before you can install the new image.

Any PC with a licensed desktop operating system installed by the OEM will have a COA (Certificate of Authenticity) affixed to the PC or attached to the software manual. The desktop operating system purchased through FPP will have the COA sticker on the CD sleeve, which you should remove from the sleeve and affix to your PC. The media itself, if original from Microsoft, will generally have a hologram imprinted on the disc itself. On new software releases, this hologram will cover the entire face of the disc. If you are purchasing OEM software through a vendor such as DELL or Compaq, then you may find that these companies have their own distribution CDs, with their own labels. These are legal CDs based upon the licensing agreement each of these companies has made with Microsoft. However, these OEM CDs are not legally licensed unless they are accompanied by the COA.

Bargain hunters are quick to purchase software at a discount. If you conduct a Web search using pricewatch.com, you will find a wide range of prices available. For instance, a search for Windows XP Professional results in a price range between $200.00 and $230.00. The prices for the Upgrade version are varied, with OEM versions coming in around $130.00. You can even purchase just the COA sticker with no media for around $115.00.

Beware! If the price is too low, then you are certainly not purchasing the legal license to use the software. In most cases, you are paying someone for a CD-R on which they have burned someone else’s licensed software. You are wasting your money. You should also be aware that Microsoft has recently been cracking down on the legality of vendors who sell the COA as a stand-alone product without the installation media and included authorized hardware purchase. There may be many ways to get software, but if you want to do it legally — there are actually only three.

In October 1992, software piracy was elevated from a misdemeanor to a felony. Making 10 or more illegal copies within a six-month period with a total value of $2,500 or more is now punishable by five years in prison and a $250,000 fine. That's for the first offense. For the second offense, it's up to 10 years in prison. When a software audit comes your way, you will not be able to say, “Officer, I didn’t know I needed a license!”