Actually, Noo, just because format c:'s software failed to activate doesn't automatically prove that someone had illegally used his product ID. Errors in activation systems do happen, even with new products straight from the box. Of course, it is usually only a moderate hassle to resolve these problems. Still, even if format's ID had been stolen, it would seem to be the thief who benefits, while format pays the price.

The lack of copy protection certainly didn't stop MS from becoming the largest software company in the world, and MS has consistently shown a willingness to sell their products very cheaply, give them away, or even subsidize them to gain a strategic advantage. Which indicates that MS has really high margins on their products. In fact, I've seen estimates that the gross margin on Windows is about 95%. Now, there isn't anything inherently wrong in this at all, but I want to reference it later.

So, I'd argue that copy protection schemes do little do deter the large, technically sophisticated, and well financed criminal organizations which practice piracy on a massive scale, while making life just a bit more difficult for the honest guys who actually form the great majority of users. Think about all the news stories showing mountains of bootleg DVDs for sale in Thai markets, while a U.S. citizen can't legally make a backup copy of a movie he buys.

What copy protection has been proven to do beyond any reasonable doubt is to create resentment and frustration on the part of legitimate users, and to spawn entire industries given to circumventing said copy protection. This isn't the first time that copy protection schemes have been prominent in the industry. The last wave of copy protection eventually collapsed under the weight of user complaints, much as DRM in the music industry is feeling the pressure. Eventually, I expect the cycle to repeat itself in the software industry.

The message that copy protection clearly delivers to the customer is "We know you'd steal this product if you could, and we also want to wring every possible cent of profit from you. Occasionally awkward and inconvenient for you? Too bad!" I'd argue that MS might be better off in the long run to accept something like a 94% margin on Windows in exchange for good will. After all, Linux gets better every day, and didn't Mac sales rise something like 35% last quarter?