UGTS Document #43 - Last Modified: 8/29/2015 3:23 PM
OEM Licensing Restrictions

A common question when building a custom computer for yourself from individual components is 'Can I legally save money by buying an OEM copy of the operating system rather than a retail or upgrade version?'.  The short answer is NO.

OEM Software licenses are usually much cheaper than retail or upgrade licenses.  It is therefore tempting to buy these licenses instead of retail or upgrade or volume licenses to install software to a machine, and then to permanently assign the license to the new or old machine in order to appear to satisfy the OEM licensing requirements.

However, while this satisfies the restriction that the OEM software must be bundled with hardware and cannot be separated from that hardware, it does not satifsy the restriction that only system builders can buy OEM licenses, and that these licenses cannot be consumed for personal use - they must be sold to another UNRELATED party - not your family, not yourself, and not to your own company.  At least, this is the policy with Microsoft OEM software.   Other software vendors may have different policies.

According to Microsoft's policy you can buy OEM software such as Windows to install it onto a new machine, but only if you are a system builder.  That is, you are going to sell or give that machine to an unrelated recipient, just like a large scale system builder would do (such as Dell, HP, or Lenovo).  If you're looking for a license for a new machine for yourself, you have to buy retail, or buy an OEM system from another system builder.

Note that this licensing still leaves a loophole - you can ask a third party to build you a system and then sell you the system.  If you do this, that third party is now the system builder, and your contract and tech support is to be provided by that company.  This kind of arrangement is usually not cost effective for the third party unless they charge a fee for building the system.  This fee would cover the extra effort of building a custom system and installing the OEM software.  And unless the third party was mass producing systems, or building high-end specialized workstations, such a fee would usually be higher than the difference between the cost of the OEM and retail license.  And since servers use a server OS which is always sold as a retail or volume license,  this kind of job would only apply to custom built workstations.  So while there may be a loophole here, it is very small and not very cost effective.  Only large system builders can legally make a profile from selling OEM software.

End users should instead either buy a new retail OS license, or move an existing retail license from another computer to the new one being built.

There are many vendors on the internet that are selling OEM software licenses.  These licenses are legal - but only if they are purchased by system builders (and not by end users) to be used according to the rules defined  for system builders.  End users can't legally purchase them for their own use.