Please note that Silverlight 1.x vs 2.0 beta have different privacy notices. Sorry this is so long. I am looking at this as a devil's advocate. This is a lot more work for me if this is an issue so I hope I am wrong.
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http://www.microsoft.com/silverlight/resources/license.aspx?v=2.0
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[Opt out for registry may be done via reg key or slup.exe it seems. This should not be an issue as long as it may be turned off which is what we did for v1.x]
7. AUTOMATIC UPDATES. This software contains an Automatic Update feature that is on by default. Microsoft may change or cancel it at any time. You may turn off this feature while the software is running ("opt-out"). Unless you expressly opt out of this feature, this feature will (a) connect to Microsoft or service provider computer systems over the Internet, (b) use Internet protocols to send to the appropriate systems standard computer information, such as your Internet protocol address, the type of operating system, browser and name and version of the software you are using, and the language code of the device where you installed the software, and (c) automatically download and install, or prompt you to download and/or install, current Updates to a previous version of the software. In some cases, you will not receive a separate notice before this feature takes effect. By installing the software and not opting out of this feature, you consent to the transmission of your computer information and the automatic downloading and installation of Updates.
8. Microsoft Digital Rights Management
[This is where I'm a bit nervous. I understand there will be some lack of functionality if this is turned off but how can you turn off the communication to Microsoft?]
DRM usage requests. If you use this software to access content that has been protected with Microsoft Digital Rights Management (DRM), the software will automatically request media usage rights from a rights server on the Internet, to enable you to play the protected content. When requesting media usage rights, the software will (a) connect over the Internet to a rights server operated by Microsoft or a third party, and (b) use Internet protocols to send to the rights server standard computer information, an ID for the DRM protected content (music or video) file, a request for permission to play the content, a unique identifier for your computer and information about the DRM components on your computer. You will not receive a separate notice before this feature takes effect. By installing the software, you consent to the transmission of this information. For more information about this feature, see http://go.microsoft.com/fwlink/?Linkid=110406.
[Automatically download and install a DRM upgrade? In our environment nothing is installed till tested in-house first]
DRM upgrades. Music or video owners who choose to protect their content with Microsoft DRM may require you to upgrade the DRM components on your computer before accessing their content. When you attempt to play content that requires a DRM upgrade, Silverlight will (a) connect to Microsoft or service provider computer systems over the Internet, (b) use Internet protocols to send to the appropriate systems standard computer information, troubleshooting data, a unique identifier for your computer and information about the DRM components on your computer, (c) and automatically download and install a DRM upgrade. By installing the software and attempting to play content that requires a DRM upgrade, you consent to the automatic downloading and installation of DRM upgrades. For more information about this feature, see http://go.microsoft.com/fwlink/?Linkid=110406.
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From http://www.microsoft.com/silverlight/resources/privacy.aspx?v=2.0
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["generally not personally identifiable"???..."such as" "typically" the language leaves it a bit open]
Internet enabled features in software will send information about your computer ("standard computer information") to the websites you visit and web services you use. This information is generally not personally identifiable. Standard computer information typically includes information such as your IP address, operating system version, browser version, your hardware ID which indicates the device manufacturer, device name, and version, application version and your regional and language settings. In this case, the application version would be the version of Microsoft Silverlight installed on your device. Microsoft Silverlight contains an update notification feature that sends standard computer information to Microsoft.
[Information is then given to 3rd parties as described below]
Information that is sent to Microsoft by this software will be used to provide you with Microsoft Silverlight features and services. This information may be used to improve Microsoft Silverlight and our other products and services, as well as for analysis purposes. Except as described in this statement, information you provide will not be transferred to third parties without your consent. We occasionally hire other companies to provide limited services on our behalf, such as packaging, sending, and delivering purchases and other mailings, answering customer questions about software or services, processing event registration, or performing statistical analysis of our services. We will only provide those companies the information they need to deliver the service, and they are prohibited from using that information for any other purpose.
[automatically request...standard computer information...]
Updating Media Usage Rights. If you access DRM protected content in a Silverlight application (typically on a website), Silverlight will automatically request media usage rights from a rights server on the Internet. You will not be prompted before Silverlight sends the request to the rights server. This helps to ensure that you have a seamless playback experience. When requesting media usage rights, Silverlight will provide the rights server with standard computer information, an ID for the DRM protected content (music or video) file, a request for permission to play the content, information about the DRM components on your computer such as their revision and security levels, and a unique identifier for your computer. The unique identifier is used only to generate rights for your computer and, because it is enclosed in an encrypted request, is not available to the rights server in a way that uniquely identifies you or your computer.
Thanks!