Recently started to see Event ID 12321 in the Application Event log at a customer. Although this is a warning event, the client was interested in knowing if this is something that could develop into a more critical issue. The event source was Security-Licensing-SLC.
Further research into this event id revealed that you might see this event id on your KMS client machines (either Windows Vista or Windows Server 2008) after you install SP2 for Windows Vista or Windows Server 2008. The event states that Token based Activation failed.
This is caused by the addition of Token Based activation in the service pack. The Service Pack code looks for an issuance license for Token Activation and when it doesn’t find one, it reports the warning message with event id 12321.
If you are not using Token based Activation ( activation by SmartCard) and most are not, the error message is innocuous and can be safely ignored. This does not affect the machines ability to KMS activate, this only affects the ability to use Token Based activation. If you are using Token Based Activation, you need to install the issuance license on those machines. The command to do this is
Slmgr -ilc <license file name>
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Rory McCaw, OpsMgr MVP