But the software company confirmed that for its upcoming Windows Vista operating system, companies will be required to activate their software differently than they do today in order to prevent the leakage of volume licenses that are the source of most Windows piracy.
A ZDNet.com blogger reported earlier in the week on a conversation between a Windows user and a Microsoft support staffer, who allegedly admitted that users who refused to install the WGA update would be given 30 days before their copies of Windows would stop working.
ZDNet.com said that Microsoft refused to deny the report at the time. But later, Microsoft appeared to sing a different tune.
"No, Microsoft antipiracy technologies cannot and will not turn off your computer," said a spokeswoman with Waggener Edstrom, Microsoft's public relations firm. "The game is changing for counterfeiters. In Windows Vista, we are making it notably harder and less appealing to use counterfeit software, and we will work to make that a consistent experience with older versions of Windows as well."
Microsoft last fall began testing WGA as a way of trying to find pirated copies of Windows. In mid-June, it announced that users would need to download and pass WGA to be eligible to download the latest versions of add-on software such as Internet Explorer 7 and Windows Media Player 11. Users would still be able get the latest security updates, though. Companies that buy Windows XP through large package deals are exempt from having to install WGA.
Since then, Microsoft has taken considerable heat from consumers and the media, who have likened WGA to spyware that has sometimes inaccurately labeled legal copies of Windows as pirated.
Through its spokeswoman, Microsoft said that "80% of all WGA validation failures are due to unauthorized use of leaked or stolen volume license keys."
Still, WGA has been so controversial that it led a French programmer to develop a tool to delete WGA and a Windows customer in Los Angeles to file a class-action lawsuit.
Microsoft has tried to appease customers by releasing a new version of WGA that checks users' computers only once a month, rather than every day.
The lawsuit, filed this week in U.S. District Court in Seattle, alleges that WGA violates antispyware laws by not fully disclosing itself when it was delivered to Windows users through Auto-Update. The suit is headed by the same lawyer who also led the class-action lawsuit earlier this year against Sony Corp. for not disclosing that it had placed copy-protection rootkit software on customers' PCs via music CDs it sold. The rootkits disabled users' protections against viruses and spyware. Sony later settled the lawsuit.
Microsoft called the lawsuit "baseless." It said WGA is a necessary part of its campaign to catch those illegally using Windows XP, especially those using volume license keys issued to corporations.
Volume licenses have long been Microsoft's Achilles heel. Corporations are generally issued a single volume license key -- a text string of alphanumeric characters -- which is used to activate hundreds or thousands of copies of Windows at a time. Those strings can be copied or stolen and have been passed around on the Internet.
To thwart the practice, corporations that upgrade to Windows Vista along with Longhorn Server will be required to run a small application called a Key Management Service. According to Microsoft and analysts, the service will track how many copies of the software the companies have paid for and how many they have installed.
When asked if companies that have installed more copies of Vista than they have purchased will find those copies de-activated, Microsoft said through its spokeswoman that companies "should think of it more like an application that tracks and protects their use of their Volume License keys and installations."
Paul DeGroot, an analyst at Kirkland, Wash.-based Directions On Microsoft, said that while most consumers may find this sort of tracking by Microsoft intrusive, many corporations may actually welcome it.
"Most corporations have no interest with getting away with anything at Microsoft's expense," he said. Indeed, corporations, especially those that have merged with another company or undergone a restructuring, often have a hard time keeping track of all the software they own. Most will "overbuy licenses because it's cheaper to do that then to designate staff people to actively manage them."
Microsoft said the Key Management Service will include administrative tools to help companies manage licenses.
"Microsoft isn't tracking the numbers of copies installed; the key management services are internal to the organization," the spokeswoman said. "We will be rolling out Vista deployment guidebooks and information for customers and channel partners later this summer.
As for consumer users of Vista, DeGroot said there is a good chance they will encounter WGA, or something like it.
The Microsoft spokeswoman added, "We don't have specific details to share on individual features of WGA in Windows Vista at this time, but WGA will continue to be a part of Microsoft's Genuine Software Initiative."