While attempting to activate your Office 2010 clients in your environment you find that some of your machines fail to activate against KMS with the following ERROR CODE: 0x80070005.
If you run OSPP.VBS to attempt activation and you may receive an error similar to the following:
C:\Program Files\Microsoft Office\Office14>cscript ospp.vbs /act
---Processing--------------------------
---------------------------------------
Installed product key detected - attempting to activate the following product:
SKU ID: 6f327760-8c5c-417c-9b61-836a98287e0c
LICENSE NAME: Office 14, OfficeProPlus-KMS_Client edition
LICENSE DESCRIPTION: Office 14, VOLUME_KMSCLIENT channel
Last 5 characters of installed product key: PKJDS
ERROR CODE: 0x80070005
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---Exiting-----------------------------
If you then run OSPP.VBS to check the dstatus and you receive an error similar to the following:
C:\Program Files\Microsoft Office\Office14>cscript ospp.vbs /dstatus
---Processing--------------------------
---------------------------------------
SKU ID: 6f327760-8c5c-417c-9b61-836a98287e0c
LICENSE NAME: Office 14, OfficeProPlus-KMS_Client edition
LICENSE DESCRIPTION: Office 14, VOLUME_KMSCLIENT channel
LICENSE STATUS: ---NOTIFICATIONS---
ERROR CODE: 0xC004F056
ERROR DESCRIPTION: The Software Licensing Service reported that the computer cou
ld not be activated using the Key Management Service (KMS).
Last 5 characters of installed product key: PKJDS
---------------------------------------
---------------------------------------
---Exiting-----------------------------
These errors can indicate a permissions issue in the registry.
There are a few reasons this error can occur. Please review the following methods to resolve.
Method #1
Please attempt to reset security permissions to default as outlined in KB313222.
How do I restore security settings to the default settings?
http://support.microsoft.com/kb/313222
Method #2
These errors can also indicate a permissions issue with the OfficeSoftwareProtectionPlatform folder. If the Network Service is missing permissions on this folder you can also receive ERROR CODE: 0x80070005.
To resolve, run the following command from an elevated command prompt:
In Vista/Win7/2008-
icacls C:\ProgramData\Microsoft\OfficeSoftwareProtectionPlatform /grant "Network Service:(OI)(CI)(R,W,D)" /t
In WinXp/2003-
cacls "C:\Documents and Settings\All Users\Microsoft\OfficeSoftwareProtectionPlatform" /t /e /p "Network Service":C
Method #3
This situation may be the result of applying a Plug and Play Group Policy object (GPO).
Computer Configuration / Policies / Windows Settings /Security Settings / System Services / Plug and Play (Startup Mode: Automatic)
If this policy is set, you can resolve this issue by either disabling this policy, or modifying the security settings for the Policy.
How to check the machine to see if that policy is being applied via a domain GPO.
From the command prompt, run rsop.msc
Check for the the following: 
If you see that Plug and Play is set to Automatic but permission is Not Defined, continue with the next steps to grant “service” rights
To check permissions for the Plug and Play service GPO via command line, run the following command:
sc sdshow plugplay
If all is configured as it should be, the output displayed when running this command will contain the following:
D:(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;BA)
(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;SY)
(A;;CCLCSWLOCRRC;;;IU)
(A;;CCLCSWLOCRRC;;;SU)
S:(AU;FA;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;WD)
If any of these permissions are missing, run the following command line to set the default permissions for the Plug and Play service:
sc sdset plugplay D:(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;BA)(A;;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;SY)(A;;CCLCSWLOCRRC;;;IU)(A;;CCLCSWLOCRRC;;;SU)S:(AU;FA;CCDCLCSWRPWPDTLOCRSDRCWDWO;;;WD)
Alternatively, the following steps can be used to edit the permissions of the Group Policy via a GUI interface:
1. Open the Group Policy that is identified in Method A, Step 1 above, and open the corresponding Group Policy setting.
2. Click the Edit Security button, and then click the Advanced button.
3. In the Advanced Security Settings for Plug and Play window click Add and then add the SERVICE account. Then, click OK
4. Select the following permissions in the Allow section and then click OK:
Query template
Query status
Enumerate dependents
Interrogate
User-defined control
Read permissions
Note: The Previous rights are the minimum required permissions.
5. Run gpupdate /force after you apply the previous permissions to the Group Policy setting.
Windows 7 displays "Windows is not Genuine" with an error code of 0x80070005 (Also applies to Office 2010)
http://support.microsoft.com/kb/2008385