OnLive Desktop is an impressive exercise in the potential of cloud services — a Windows 7 client with Microsoft Office that streams to your iPad or Android device. We fell in love at first virtualization, and it's received mainstream attention (and praise) from the likes of The New York Times' David Pogue, who specifically and repeatedly called it "Windows on the iPad." But, critically, does the service fall in line with Windows' licensing terms and conditions? Microsoft seems to think not.

In a post today, Corporate VP of Licensing Joe Matz outlined what the company's terms allow for in Windows virtualization. More to the point, he very explicitly called the OnLive situation an "issue" that needs to be resolved and said that Microsoft is "actively engaged with OnLive with the hope of bringing them into a properly licensed scenario." It sounds like this discussion has been ongoing but only now is being made public due to inquiries from analyst firm Gartner — whether or not that's actually the reason remains to be seen. We've reached out to OnLive for comment and will let ya know what we hear.