If an active/passive cluster is set up, SQL server is installed only on the primary node of the cluster. Therefore, the license information is local to the primary node and, when failover takes place, the secondary node, which does not have license information for SQL server 7.0, cannot validate the replication scenario and see whether "per seat" or "per server" license mode is set.
NOTE: The license error may sometimes be a symptom of some other problem. If so, please be sure that the root problem is fixed before you fix the licensing. For example, the following error means that the logreader agent is unable to connect to the server:
Connecting to Publisher 'SHOPDB.bnshop'
Status: 2, code: 0, text: 'The process could not connect to server 'SHOPDB'.'.
The process could not connect to server 'SHOPDB'.
Status: 2, code: 1326, text: 'Client unable to establish connection'.
SHOPDB.bnshop: sp_MSgetversion
Status: 0, code: 27101, text: 'The license for this installation of SQL Server does not permit Log Reader Agent to run at the Publisher.'.