My understanding is that there isn’t a lot of difference between a fresh install and an upgrade in terms of activation; that is because Windows 10 does not actually require a key to install, it is possible to keep using it in a sort of ‘demo’ mode, that lasts a year IIRC, where the OS is fully functional with the exception of the Personalization options, which stay locked until Windows is activated.
In the case of an upgrade, the servers will receive the old key, and determine whether it is eligible for an upgrade, in which case they will issue a new Win 10 key; whereas in a fresh install, the WIn10 key is provided by you, and they will make sure it is valid.
AFAIK, regardless of the path taken, all copies of Windows 10 will activate to one of the available product versions, i.e. each activated Windows 10 Home install is indistinguishable from another.
Microsoft is the ultimate judge on whether a user is eligible to a legal, or genuine, copy of Windows or not, and I’ve heard of cases where servers refused automatic activation but, upon calling Microsoft, existing users were given a new, valid key.
Rampant piracy notwithstanding, which clearly Microsoft has been trying to curb (it’s a security problem, too), I think it’s fairly safe to say Microsoft is happy if people use Windows.
I cannot, however, shed any light on the legal aspects, as those, besides being rather intricate, are likely different from country to country, even within the EU.