Cause:  The Terminal Server licensing mode on the terminal server might be set to Per Device, while the license server might be configured to issue only Per User client access licenses (CALs). If this is the case, then the license server issues only temporary licenses that cannot be upgraded. When the temporary licenses are within several days of expiring, "Event ID 26, Source: Application Pop-up" appears in the application event log on the client. The event message indicates the number of days remaining before the temporary license expires. Similarly, "Event ID 1011, Source TermService" appears in the application event log on the terminal server.

Solution:  Change the Terminal Server licensing mode from Per Device to Per User.

Important

Per User CALs are not monitored by Terminal Server. This means that even though there is a Per User CAL in the license server database, the Per User CAL is not decremented when it is used. This does not remove administrators from End User License Agreement (EULA) requirements to have a valid terminal server CAL for each user. Failure to have a Per User CAL for each user, if Per Device CALs are not being used, is a violation of the EULA.

The following text is from the EULA for Windows Server 2003:

"Two different TS CALs are available to you: 'Device' and 'User.' Each TS Device CAL permits one Device (used by any User) to conduct Windows Sessions on any of your Servers. Each TS User CAL permits one User (using any Device) to conduct Windows Sessions on any of your Servers. You may use a mix of TS Device CALs and TS User CALs simultaneously with the Server Software in your environment. You can have a Terminal Server request Per User licenses or Per Device (default) but not both simultaneously."