By doing a clean install on a formatted hard drive, Microsoft has little way of checking whether your previous OS version
With Windows 10's release looming ahead on July 29, Microsoft Corp. (MSFT)
has answered most questions about the highly anticipated (mostly) free
operating system upgrade. But one unanswered question has been
what fate will await those with Windows XP and Vista.
I. Loophole Opens Door to Legacy Upgrades
The official party line from Microsoft is that you will have to buy an
individual license, or an OEM license resold in bulk. But for
those with a Windows XP or Vista machine who don't want to spend $100 USD or more, it appears there's a clever workaround -- but only if you act immediately.
The workaround begins with a Windows 10 Insider Preview ISO.
Ordinarily, you can't install Windows 10 on a Windows XP or Windows
Vista PC. But since at least Insider Preview Build 10130, consumer
available ISOs have been offered direct from Microsoft. Once
burned to a DVD, these ISOs can offer a clean install.
Does Microsoft officially approve of this loophole? Obviously not.
Technically speaking these clean installs are not intended for
Windows XP or Vista computers as that would arguably be bad or wrong.
You're supposed to upgrade to Windows 7, 8, or 8.1 and then install the Preview Build.
[Image Source: The Verge]
But the problem is that if Microsoft goofed up and somehow bricked your
existing Windows 10 install, and you were testing on a Windows 7, 8, or
8.1 machine and forgot the license key (or weren't given it properly by
your OEM) you'd essentially be left with nothing unless Microsoft gave
you a recovery option. Being a good sport, Microsoft has done
precisely that, via the clean install ISOs. But their existence
also creates an interesting loophole as you can use them for a fresh
install on a machine currently running Windows XP or Vista.
It's worth noting, as well, that this loophole isn't particularly new. Users with an enterprise subscription could get preview ISOs for the Technical Preview for Enterprise builds (the enterprise equivalent of Insider Preview builds) for some time now.

[Image Source: Public Domain]
Now Microsoft has already said that ALL users running official Windows
10 Insider Preview Builds will receive an update to the full licensed
Windows 10. But it's also said that you need a Windows 7, 8, and
8.1 license to get a free upgrade to Windows 10. So what happens
if you do a clean install over a Windows XP or Vista license? Will
you be frozen on the Insider Preview?
II. License Required?
While some were aware of the loophole, interest in it picked up
following official comments by Microsoft on Windows 10 licensing.
In a blog, Microsoft wrote (emphasis mine):
As long as you are running an Insider Preview build and connected
with the MSA you used to register, you will receive the Windows 10 final
release build. Once you have successfully installed this build, you
will also be able to clean install on that PC from final media if you
want to start over fresh. It's important to note that only people running Genuine Windows 7 or Windows 8.1 can upgrade to Windows 10 as part of the free upgrade offer.*
The statement prompted fears among users who had started with an
authentic copy of Windows 7, 8, and 8.1, but had been forced to do a
clean install due to a failure in one of the Insider Preview builds.
At the heart of the controversy was the question of whether such a
tactic would be fair, as a small, but significant numbers of Insider
Preview testers had faced catastrophic failures that forced them to do a
clean reinstall. If they had lost their license info, or weren't
properly given it by their PC OEM, these users would effectively be left
behind, in spite of starting with a valid copy of an upgrade-applicable
Windows license.
User fears were heightened because that passage of the post written by Windows manager Gabriel Aul had previously read:
As long as you are running an Insider Preview build and connected
with the MSA you used to register, you will receive the Windows 10 final
release build and remain activated. Once you have successfully installed this build and activated, you will also be able to clean install on that PC from final media if you want to start over fresh.
The addition of the last sentence and deletion of the bolded clauses in
the original paragraph appears to be the work of Microsoft's legal
department and perhaps raised more concern than if it had simply been in
the post from the start.
But was Microsoft truly saying that it would shut out Insider Preview
testers? Or was it just stating for the record that it didn't
condone the exploitation of this loophole for legacy upgrades?
Aul himself chimed in, hinting at the latter. Responding to a user question submitted to his Twitter Inc. (TWTR) account (@gabeaul), he writes:
So
apparently the loophole still exists. This sort of makes sense,
as at the end of the day Microsoft has no reliable way of telling the
difference between a hard drive with a bricked Windows 7/8/8.1 on it vs.
a bricked install of XP/Vista.
III. Exploiting Loophole Carries Some Risks
Some readers may ask -- why don't we see this approach normally?
That's largely because with the normal consumer release scenario the old
saying "buyer beware" applies. But when it comes to Insider
Preview test builds, Microsoft's decision reflects the reality that
prerelease software can and will often suffer major failures. Thus
Microsoft's decision to condone the loophole ultimately boils down to
its realization that any move to punish XP/Vista users exploiting the
clean installs would also wind up harming legitimate users.
Thus if you're willing to throw your moral compass out the window and
embrace the dark joys of piracy, than you potentially may want to
utilize this loophole before it closes for good with the release of
Windows 10 (at which point Insider Preview ISOs will no longer properly
install).

Those who exploit the loophole to pirate Windows 10 onto Windows
XP/Vista machines will be stuck in the Insider Program unless they pay
up to get an authentic license.
This may seem like a loss to Microsoft, but some are pointing out that ultimately the impact should be small. Neowin's chief editor Brad Sams, for instance, writes:
You could make the argument that Windows XP or Vista users can save
themselves a couple hundred dollars and use this method to upgrade to
Windows 10 for free but if a consumer is still using XP, the likelihood
of them jumping to Windows 10 is small as they have remained entrenched
with the decades old OS. And even if a few do, the bottom-line impact of
this loophole is minimal, except in China, where piracy runs rampant.
But in that case, do you believe those users, who already pirated
Windows XP, were going to buy Windows 10 in the first place?
Indeed, they probably were not going to.
As a final note for those who consider exploiting this loophole be aware
that just because Microsoft does not currently have a tool to check for
Windows XP/Vista on a clean install does not mean that it won't get
one. Users who leverage the loophole may be able to safeguard
themselves somewhat by first formatting their drive before attempting to
install.

[Image Source: Quoteko]
Ultimately use the loophole at your own risk, as it's possible at some
point Microsoft could yet come with some sort of novel validation scheme
(e.g. requiring users who clean installed give the serial numbers of
their laptops to verify they're of the proper era) to weed out many of
those look to exploit the loophole.
Also be aware that if you do exploit the loophole you will likely be
stuck semi-permanently in Microsoft's Insider Preview program. As
opting out requires a license to activate your operating system,
customers who exploit the loophole will either have to accept their lot
as Microsoft's software guinea pigs or begrudgingly pay for a license.
Hence, this particular piracy won't be a complete loss for
Microsoft.
Sources: Windows [official blog], Gabriel Aul on Twitter (@GabeAul), via Neowin
“We do believe we have a moral responsibility to keep porn off the iPhone.” -- Steve Jobs
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