Microsoft's high-profile campaign against software piracy has fallen foul of hackers only days after its launch.
Under the Windows Genuine Advantage (WGA) scheme, users of Microsoft products are supposed to face online checks of the authenticity of their software each time they download updates over the Internet.
WGA, which was announced last week, was designed to counter what Microsoft sees as one of the greatest threats against its dominance of the software industry: pirated versions of its own products.
However, hackers have discovered that just a single line of code turns off the programme that initiates the check. The code means that users can bypass having to verify the serial number of their Windows software before they download updates.
Microsoft confirmed to Guardian Unlimited that it was investigating reports of the hack, but stressed that the security of Windows users had not been compromised.
The authentication process was designed to be mandatory for all software updates except security patches. The news that it is not will come as a blow to Microsoft, which is finding its sheer size is limiting its scope for growth and is trying to improve its image in terms of the security of its applications.
Despite challenges from rivals such as Linux, the open source operating platform, Microsoft still accounts for more than 90% of the desktop software market. However, it has been estimated that as many as a third of all Windows products being used are pirate copies, from which Microsoft receives no revenue.
According to the Business Software Alliance, the cost of pirated software in the UK to national and international software publishers in the UK alone is worth over £1bn a year.
The company last week launched a test version of the next version of Windows, Windows Vista, to a limited number of computer experts who will check it for bugs. Mr Gates has made it clear that the new product will concentrate on countering hackers.
Online criminals have focused on breaking into Windows software and applications such as Microsoft's Internet Explorer because they account for such a large part of the market. Vista was developed under the code name Longhorn and is due to be released to the general public in the second half of next year.
Under WGA, users who are revealed to be running counterfeit copies of Windows should face one of two options.
Customers who fill out a piracy report, provide proof of purchase and send in the counterfeit CDs will get a free copy of Windows. Those who simply submit a piracy report, giving details of when, where and from whom the operating system was purchased, and send in the counterfeit copy, will get Windows at half price.
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