Same Windows (XP) license on both the host machine and virtual machine

Can we use the same Windows license used with our machine’s installation to install Windows on a virtual machine (VM), which is running on top of the original installation? What is the legal method for achieving this?

Unfortunately, you cannot have a VM running Windows using the same license used on your host machine, because the VM is treated as a separate computer. The Microsoft EULA is very ambiguous when referring to virtualization:

“The term ‘COMPUTER’ as used herein shall mean the
HARDWARE, if the HARDWARE is a single
computer system, or shall mean the computer system with
which the HARDWARE operates, if the
HARDWARE is a computer system component.”

1.1 Installation and use. You may install, use, access,
display and run one copy of the SOFTWARE on the
COMPUTER. The SOFTWARE may not be used by more than
two (2) processors at any one time on the COMPUTER,
unless a higher number is indicated on the COA.”

“1.2 SOFTWARE as a Component of the COMPUTER – Transfer.
This license may not be shared, transferred to or used
concurrently on different computers. The SOFTWARE
is licensed with the COMPUTER as a single integrated
product and may only be used with the COMPUTER.”

After various forums responses from several Microsoft representatives its clear that Microsoft expects you to purchase a new license for every Windows installation.

Some legal solutions to this problem:

  • The obvious one: Buy another Windows license to use with your VM. Not very desirable, seeing as Vista and Windows 7 are each over $70. Windows XP is not even sold anymore (according to Microsoft).
  • Use Linux as the host OS, using your Windows license only on the VM (Linux has excellent VM capabilities)
  • Get Vista Ultimate along with Software Assurance from Microsoft. This allows up to 4 VM uses of the same license key.
  • See if running Linux on the VM instead of Windows suits your needs (simulate Windows using Wine, etc…), and keep the Windows installation on the host machine.