I've seen that error before, There's two different errors:
One is the one you described, and it comes from pirated CD-KEYS that Valve has banned from the WONID permanently, so forget it.
The second one actually states that the CD-KEY is already in use.
Go buy the game, I tried (yes I'm confessing) numerous CD-KEYS from the internet to try and play, because I had one version of HL and 3 computers. However, NONE of them ever worked, and the few I did were banned from half the servers beacuse "l33t h4x0r5" had cheated and hacked on those servers, making connecting to other servers beyond retarded. I thankfully caved and forked out the $40 bucks it cost to buy two copies and I was happy again.
Pirating is for suxor. That is it. Learn my lesson and learn it well.
In defense of M33M00, my bud and I usually play DOD at my house, so he willingly gave me his CD-key for use at my house because when he's up late playing it at his house, he's not over playing it at my house, so there's no problem. You could try that.