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.