A lawsuit that accused Microsoft of misleading consumers to download and install an update for Windows Genuine Advantage (WGA) under the guise that it was critical security update will go forward, but not as a class action. A federal judge has refused to certify the lawsuit as a class action, which would have meant anyone who owned a Windows XP PC in mid-2006 could join the case without having to hire an attorney. As Windows XP was easily the most popular operating system at the time, the move means Redmond has managed to avoid hundreds of millions in potential damages. Microsoft has until February 12, 2010 to submit its expense list to the court.

The issue began more than three years ago when it was revealed that beta versions of WGA "phone home" once every day, though later Redmond said the daily checks were there just because the software was in beta and confirmed that more recent versions communicate with the company approximately once every 90 days. Nevertheless, privacy advocates were outraged, and in June 2006, after Microsoft began pushing WGA to Windows XP users via Windows Update as a "high priority" update, a suit was filed alleging that WGA was spyware. It demanded compensatory damages ("either actual damages or one hundred thousand dollars per violation, whichever is greater"), injunctive relief, and a requirement for Microsoft to fully disclose WGA's "potential security and other risks" to the public. Furthermore, the suit wanted Microsoft to produce a tool that could easily remove WGA from any Windows PC.

Microsoft uses WGA to detect pirated copies of Windows and inform the user that the software is counterfeit, nagging them with messages and eventually locking down. In Windows 7, Microsoft rebranded WGA to Windows Activation Technologies (WAT), saying that the technology used in Windows Vista and Windows 7 is fundamentally different from that used with Windows XP. Future versions of updates of the technology for Windows Vista will also be referred to as WAT. Microsoft still plans to keep WGA updates coming for Windows XP.