Microsoft has revealed that it believes OnLive's virtual Windows desktop for Apple iPads and Android devices is in breach of licensing terms.
Alongside a cloud-based gaming service, the company recently launched a new consumer version of OnLive Desktop, which allows iPad and Android tablet users to run full versions of Office and Windows 7 - without purchasing either product.
And while one might have assumed that the company had some sort of licensing agreement in place with Microsoft, it now appears that it didn't.
Joe Matz, Microsoft's corporate vice president for worldwide licensing and pricing, says that OnLive is in breach of the company's Services Provider License Agreement.
"SPLA does not support delivery of Windows 7 as a hosted client or provide the ability to access Office as a service through Windows 7. Office may only be provided as a service if it is hosted on Windows Server and Remote Desktop Services," he says.
The issue had already been highlighted by analyst firm Gartner, which recently queried whether OnLive had a valid product license.
"In Gartner's view, if Microsoft were to conclude that OnLive is misusing its products, Microsoft could potentially take action against OnLive that could affect OnLive's ability to service clients," it wrote in a report.
"Gartner believes that there's also a risk that Microsoft could hold both OnLive and its customers responsible for any potential mislicensing."
"We are actively engaged with OnLive with the hope of bringing them into a properly licensed scenario, and we are committed to seeing this issue is resolved," says Matz.