I thought software keys were not covered, or is that Ebay only?
Honestly I've never had to try and claim one back as I've never had any problems buying codes from people on eBay.
I had a look at the PayPal Buyer Protection terms and it looks like they now cover intangible items (which includes digital I think). Most reputable sellers would try and sort it out without going that far though.
Section 13.3
We are increasing the scope of PayPal Purchase Protection to now include coverage for intangible items. References to intangible items have been removed from the new Section 13.3 which reads as follows:
13.3 Ineligible Items. Payments for the following are not eligible for reimbursement under PayPal Purchase Protection:
Real estate, including residential property
Businesses
Vehicles, including motor vehicles, motorcycles, caravans, aircraft and boats
Significantly Not As Described issues for Custom-made items
Items prohibited by the PayPal Acceptable Use Policy
For INR claims, items which you collect in person or arrange to be collected on your behalf, including items bought through In-Store Checkout at the retail point of sale
Industrial machinery used in manufacturing
Items equivalent to cash, including prepaid or gift cards
PayPal Direct Payments
Virtual Terminal Payments
Personal Payments
Even if your payment is not eligible for PayPal Purchase Protection, you can file a Dispute and try to resolve the issue directly with the Seller; however, PayPal will generally not find in your favor if you escalate a Dispute to a Claim for an item which is not eligible for PayPal Purchase Protection.