Correct - when you "upgrade", you're still using the previous Windows license to "license" the (much cheaper) upgrade license. In essence, they're both in use on that machine - you must ALWAYS have a fully-licensed product installed, meaning upgrades don't meet that critera (again, we're talking about legal here, not "works"). Upgrades consume the full product license "underneath it", so to speak. You need both on one machine for them both to be legal, hence if you want to re-use a Win7 license, you should instead upgrade over an XP install or Vista install and lose the use of that license instead.