OnLive, the game streaming company, announced the launch of their new technology in January that lets iPad 2 users stream a fully featured Windows 7 desktop on their tablet. It’s an awesome technology that lets iPad 2 users have the full functionality of Windows 7’s Office suite. There may be a few problems though.

Joe Matz, Corporate VP of Worldwide Licensing and Pricing took to the Microsoft blog last week to discuss some of the issues that arise due to OnLive’s technology. The problems seem to stem from whether or not OnLive has permission to offer these tools to users without a license.

Here are the two issues at hand according to Matz:

Customers that want to work with partners to have them host Windows 7 in a Virtual Desktop Infrastructure solution on their behalf, can do so when the customer provides the partner licenses through the customer’s own agreements with Microsoft. The hosting hardware must be dedicated to, and for the benefit of the customer, and may not be shared by or with any other customers of that partner.

Microsoft partners who host under the Services Provider License Agreement (“SPLA”) may bring some desktop-like functionality as a service by using Windows Server and Remote Desktop Services. Under this solution, the partner is free to offer this service to any customer they choose, whether or not they have a direct licensing agreement with Microsoft. However, it is important to note that 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.

These terms according to Matz help Microsoft provide a “quality experience for end customers using Windows” and to protect their intellectual property. Fair enough, but what are they going to do about OnLive?

Matz says that they were made aware of OnLive’s program and are now working with them to bring the service into a “properly licensed scenario.” Instead of outright bringing the ban hammer on the service, it’s good to see Microsoft being proactive about letting iPad users have access to a Windows 7 desktop.

There were rumors floating around that Microsoft was bringing their Office tools to an iPad near you. Microsoft denied the rumor, but it could jeopardize OnLive’s ability to bring Windows 7 to iPads if Microsoft were to bring their own services to the device.

Have you used OnLive’s Desktop service yet? Does it provide the desktop experience you’ve wanted? Let us know in the comments.