Hi Steve Hanna,
I know Windows activation inside Parallels can be a bit tricky. Running slmgr /upk removes the key from the local VM, but it does not remove the digital entitlement stored on Microsoft’s activation servers, which is why the old VM still shows as activated. In Parallels, each VM has a different hardware ID, so Windows treats the new VM as a completely different device, and this often prevents re-activation. In many cases, certain Windows keys (OEM, system-locked, or discounted types) are not transferable, which can also cause the “license already used” error.
To try a proper transfer, you can recreate or boot the old VM, run slmgr /cpky and then slmgr /upk again, restart it, and then attempt activation on the new VM using slui 4 (phone activation). If this still fails, the license is likely non-transferable and you would need a new key for the second VM.
If you’d like, share just the first five characters of your product key and I can help check the license type. If this explanation helps, please click “Accept Answer” so others can find it useful 😊.
Jason.