I have a friend that keeps a collection of burned Windows CD's; 2000, XP, Vista which he uses to repair peoples computers with. Now he justifies this by saying he uses the CD-Key on their OEM sticker that came with their PC. As long as the installation validates the installation should be 100% legal. Is this true? I've always been under the impression you had to use the original CD/DVD that came with the computer.
It's the key that's the important thing, as long as each machine uses it's original key then you're legal. You can use the OEM key if it's available, or the key that came with the disc if they had installed a retail version of Windows. In the latter case you don't need to use the original disc as the burned installer is treated the same as the pressed disc.
NOTE: I'm not saying that you can reuse keys from other installations, as that would clearly be piracy. If you have a valid key then at some point in the past you (or the OEM) had an installation disk.
Your friend is incorrect.
The licensing terms for Windows Vista seem to suggest that the single allowed backup copy is permitted for use only for reinstallation which would forbid fresh installs:
BACKUP COPY. You may make one backup copy of the media. You may use it only to reinstall the software.
Arguably, this could be interpreted as leaving room to reinstall on other machines. This interpretation of Microsoft's intent is doubtful, based on their wording regarding Windows 7. The language at the Microsoft Store explicitly states that the Windows 7 media is to be used for the licensed computer only:
The license terms for Windows 7, once accepted, permit you to make one copy of the software as a back-up copy for reinstallation on the licensed computer.
Use of the definite article suggests it is illegal to use it on just any computer (ie., "the computer" vs "a computer").
Summary: It's most certainly illegal; the serial number alone is not enough.
A burned CD is an illegally made copy of an original CD. Any copying of the data on an original CD is illegal unless allowed by the copyright holder, i.e. Microsoft. An installation of the original CD to a computer is only legal because Microsoft have given their permission in this specific case. I would assume that Microsoft have not gone out of their way to explicitly allow use of illegally made CD copies to install onto a PC.
Therefore, most likely illegal.
(I am not a lawyer. This is not legal advice.)
(To those downvoting this answer without commenting: You are most likely deluding yourself because you don't want this to be true. This does not, in fact, change the reality of it. Nor does the fact that Microsoft may not be cracking down on this practice - go on, contact them and ask them for blanket permission to do this, and see what they say.)
If this is 2000 or XP- he may be lying, a bog standard retail OEM key works only with OEM keys and a Dell, HP or other manufacturers key only works (*) with the correct CD from that manufacturer.
- Vista, 2008 and 7 do not even need keys if you have the correct CDs
However, I have a collection of original CDs from Dell and other manufacturers that I see on a daily basis and I use the correct edition when I see the correct licence if/when I need to do a restore.
Is it illegal - I don't think so - IANAL, but I really do not see the problem on original media if you only install on legally licensed machines - at the end of the day, if you lose the media, you pay £xx and will just get the same cd in the post.
... As for burned media, just be careful - if you do not know where it came from, you could be walking in to a lot of other problems later on.