Late last week, Microsoft published a post on the Microsoft SMB community blog announcing that using any "hack" to install Windows 7 from upgrade media is not necessarily "legal" - and that users do not own the rights to perform such installs from upgrade media using this process.
If you're an owner of upgrade media, then you've probably experienced the painful migration process that the upgrade process tries to force you through - if you're using XP it requires you to boot to an existing Windows installation, use Windows easy transfer to backup your information, then will allow you to complete a "clean install" if it detects a partition with a previous, licensed copy of Windows installed. If you own Windows Vista you can also perform an in-place upgrade - which is often a slow, painstaking process.
The blog post, published by Eric Ligman appears to target Paul Thurrott's attempt to help confused users (that Microsoft has neglected) outlines that you must own a "qualifying full license to upgrade from in order to use the Upgrade license" and that by performing a clean install by using a hack you do not own a licensed copy of Windows. Eric Ligman also posted an image to demonstrate proper Windows upgrade licensing:
Eric goes on to point out that" ..when these posts and write-ups state that you can install clean from an Upgrade piece of software and they fail to mention that you need to own a qualifying software license to be legal to use the Upgrade software for the installation, they give the impression that because it is technically possible, it is legal to do."
The problem Microsoft has created is for customers that potentially do not have previous versions of Windows installed or on hand - a few years ago, you could boot to the setup, insert the older Windows media into the CD drive and it would detect that it was a legitimate copy. Now, Microsoft no longer offer this feature and forces users to have Windows already installed to prove that they have it licensed to them. Interestingly enough, this hack has actually been available since Vista was released in 2006 and was commonly used back then to perform clean installs from upgrade media too.
Eric goes on to point out that if you do own a full license to a qualifying previous version of Windows, then you own the rights to perform a clean install, as per the image above. A qualifying license is a full version of Windows XP or Windows Vista, not an upgrade edition.
Eric has also posted stating that he will answer further questions on Monday - Neowin will provide updates as more details are available.
Edit: Title corrected