Microsoft announced this week that its controversial Product Activation technology, which is included in Windows XP, Office XP, and Visio 2002, has passed an independent security audit. Deloitte & Touche, an accounting and auditing firm, conducted an examination, in keeping with American Institute of Certified Public Accountant standards, of Microsoft's public assertions about the activation process and found that the technology worked as advertised and maintained user privacy.

"Our overarching goal is to ensure that consumers have complete control over their information," said Richard Purcell, director of corporate privacy for Microsoft. "Microsoft's adherence to the fair information principles dictates that processes such as product activation collect only what's necessary for the task at hand."

Product Activation is designed to prevent casual copying, ensuring that users install each product copy on the correct number of PCs, based on the product's license. For Windows XP, that number is one. Previously, users could bypass Microsoft's licensing policies by simply using the same product ID to install a single copy of Windows on multiple PCs, leading to billions of dollars in lost revenues. The company says that it has successfully used Product Activation before--in Australia, Brazil, China, Hong Kong, and New Zealand--with its Office 2000 products. Windows XP, Office XP, and Visio are the first products to use this technology worldwide.

Because of perceptions that Microsoft was somehow watching its users in a manner similar to George Orwell's Big Brother, privacy groups, industry pundits, and other groups reacted in outrage to Product Activation. But the reality is that the technology will simply prevent users from pirating software; it's unlikely to affect most people who use these products. For example, PC makers will generally preactivate Windows XP on new PCs.