Microsoft said it is seeing piracy rates for Windows Vista that are half those of Windows XP.
The decline in piracy rates is largely due to the fact Vista is much tougher to fake than XP.
Microsoft VP, Mike Sievert, said: "Piracy rates are lower because it's harder."
There are a variety of reasons for that, including the fact that businesses no longer have volume license keys that can be used to activate an unlimited number of machines. Another is the fact that Vista machines that are not properly activated quickly become basically unusable once they enter "reduced functionality mode".
For Microsoft, the gains have been significant. In its last profits call, Microsoft said five percentage points of Windows growth could be attributed to gains in piracy.
But Microsoft is making the experience a little less harsh for those running pirated versions of Vista. With Service Pack 1, Microsoft is doing away with reduced functionality mode in favor of putting prominent notifications on systems that are not found to be genuine.
Non-genuine systems with SP1 will display a warning at start-up that the system is not properly activated. Users will have the option to "activate now" or "activate later", though the second option will not show up for a time. Users will also have their desktop background changed to white and a prominent notification placed in the lower right hand corner saying that the machine is not genuine.
Still, in a significant change, those with non-genuine or non-activated copies of Vista will still be able to use their systems. Sievert said the change is designed to minimize the impact on customers who might unwittingly have gotten an illegitimate copy of Vista while still discouraging piracy.
He said: "People won't want this experience, at the same time it will be broadly interpreted as being more fair."
Also with SP1, Microsoft is closing two key loopholes that pirates have used to evade Microsoft's security measures.
One involves mimicking the process used by large computer makers to pre-activate their Vista machines, while the other extends the grace period that customers have to activate their machine, in some cases extending it for decades.
It is not the first time Microsoft has moved to close holes in its activation process. A year ago, the company changed Vista to disable a hack known as "Frankenbuild" that merged elements of the final Vista with a pre-release version.
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