Microsoft defends WGA

According to Kochis, those 12 million failures mostly involve "a mix of other types of counterfeiting and piracy, including a variety of forms of tampering, hacking and other forms of installing unlicensed copies. Sometimes people try to hack Windows Product Activation itself (often not totally successfully, either) and other times, people try to modify files to prevent XP from needing to activate at all, he said.

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Kochis acknowledged that "some failures" are caused by users with genuine copies of Windows XP who improperly install or repair software on their PC. Such activities "will result in WGA validation failures, and they should," he wrote.

But Kochis also said that there are a number of other scenarios "that could result in a WGA validation failure that a user might be surprised by or even deny."

They include users unknowingly being sold copies of Windows XP by stores that illegally reuse the same license key with multiple customers, users who take their PCs for repair into shops who similarly reuse the same license key, users that share copies of Windows XP with their friends or acquaintances, and users who reuse the same key on more than one PC at a time.

Under Microsoft's strict licensing policy, users who bought a PC from a hardware vendor such as Hewlett-Packard or Dell with Windows XP preinstalled typically own a reseller license that forbids them from installing XP on another computer -- even if the first PC is no longer functional. Microsoft wants users to go buy a full-priced retail copy of Windows XP for new PCs. Windows XP Professional currently costs $299 at CompUSA.com and goes for similar prices at other stores.

Kochis said Microsoft investigates all "credible" reports of genuine copies of Windows XP failing to validate under WGA.

But "far more often than not, the software performed as designed and the failure was due to the software, in fact, being counterfeit and the customer simply not wanting to believe it," he wrote.

While installing and running the WGA is technically optional to Windows users, users complained about the way it was automatically installed as a "critical" update. Those who declined to install WGA were reminded about WGA every time they rebooted their PCs.

Microsoft abandoned those features in late June. But users must still install and pass WGA in order to be eligible to download certain free software, such as the company's upcoming Internet Explorer 7.0 Web browser and its antispyware program, Windows Defender.

The company also faces two class-action lawsuits related to WGA.