Upgrade/Install of Remedy fails during an attempt to encrypt passwords.  

The following lines from the arsystem_install_log.txt file show where the install fails:
........................
[arserver.installer.encryption.description],Progress=[5],Detail=[ Executing Encryption Utility]}
[arserver.installer.encryption.description command arg = D:\Program Files\Java\jre1.7\bin\java.exe]}
[arserver.installer.encryption.description command arg = -Dlogback.configurationFile=file:D:\BMC Software\ARSystem\conf\logback_server.xml]}
[arserver.installer.encryption.description command arg = -Dcom.bmc.arsys.homedir=D:\BMC Software\ARSystem]}
[arserver.installer.encryption.description command arg = -classpath]}
[arserver.installer.encryption.description command arg = "D:\BMC Software\ARSystem\lib\upgradeutils\*;"]}
[arserver.installer.encryption.description command arg = com.bmc.arsys.server.domain.configuration.connect.Main]}
[arserver.installer.encryption.description command arg = -encryptraspw]}
[arserver.installer.encryption.descriptionStarting Encryption Utility ]}
['D:\Program' is not recognized as an internal or external command,]}
[operable program or batch file.]}
[arserver.installer.encryption.descriptionFailed to run Encryption Utility]}
........................

Legacy ID:KA42874

This behavior is documented as a defect for the installer (SW00486534) where the solution is:
- Define the 8dot3name property for the Program Files directory print to installing Java.

For example:
To define short names (8dot3) for D:\Program Files, perform the following:

    1.   Restart the computer in safe mode with command prompt.
    2.   Logon from the command prompt and enter the following:
         D:
         fsutil 8dot3name query
         fsutil behavior set disable8dot3 0
         fsutil file setshortname "Program Files" PROGRA~1
         dir /x
    3.  Verify the 8.3 folder name exists.
    4.  Reboot in normal Windows mode and run the install.

Example of a working scenario:
........................
[arserver.installer.encryption.description],Progress=[5],Detail=[ Executing Encryption Utility]}
[arserver.installer.encryption.description command arg = D:\PROGRA~1\Java\JRE17~1.0\bin\java.exe]}
[arserver.installer.encryption.description command arg = -Dlogback.configurationFile=file:D:\BMC Software\ARSystem\conf\logback_server.xml]}
[arserver.installer.encryption.description command arg = -Dcom.bmc.arsys.homedir=D:\BMC Software\ARSystem]}
[arserver.installer.encryption.description command arg = -classpath]}
[arserver.installer.encryption.description command arg = "D:\BMC Software\ARSystem\lib\upgradeutils\*;"]}
[arserver.installer.encryption.description command arg = com.bmc.arsys.server.domain.configuration.connect.Main]}
[arserver.installer.encryption.description command arg = -encryptdbpw]}
[arserver.installer.encryption.descriptionStarting Encryption Utility ]}
[arserver.installer.encryption.descriptionCompleted Encryption Utility []]}
........................
*****   Another alternative to solve the issue is to temporarily create a symbolic link to the jre folder. Create a link using a short name (8 characters or less) that points to the actual path of the jre directory. 
Below is an example using the path above. 

Open a CMD windows as Administrator. Change to the D drive then execute the command.
mklink "D:\java"  "D:\Program Files\Java\jre1.7"

When you run the install type in the path D:\java for the location of java.

The link is only required for the installers therefore is only need until you complete all of the Remedy installs.  The link can then be deleted.

Related articles(s):
Remedy - JDK/JRE 1.9.x compatibility with ARS/ITSM applications
Remedy - Server - v.9.x Installers not recognizing Java Update as a valid version. Error:"Invalid 64-bit JRE version" or/and "Invalid 32-bit JRE version"
Remedy - Server - When upgrading from 8.1.02 to 9.1.02 seeing the error "You have selected an incorrect 64bit JRE path. Please select the correct JRE path and continue"