If you try to use a Windows 7 upgrade product key on a clean install (an installation where there was not already a copy of Windows on the disk), you will receive an error message when attempting to activate:
Description: The Software Licensing Service determined that this specified product key can only be used for upgrading, not for clean installations.
One workaround is to reinstall a fully licensed earlier version of Windows on the computer and then upgrade to Windows 7. Of course, this requires you to start over and install Windows twice, which is time-consuming.
Another possibility is to modify a registry key, “rearm” the licensing manager, reboot, and then enter the product key again.
Next, open an elevated command prompt (run the command prompt as administrator) and enter the following: slmgr -rearm
Reboot the computer. NOTE: If you have any pending Windows updates, they may mess up the “re-arming” process, and you may have to do the first two steps again.
After rebooting, enter your upgrade product key in the activation dialog, and everything should work. (To open the activation dialog, click the Start button and type “Activate Windows.” You should see the “Activate Windows” control panel in your search results, which you can click to open the activation wizard.)