For License administrators to restrict the licensing activities based on the identity of system in use (Virtualization based or a Physical), can be achieved via 2 ways.

1.) Restricting the vendor daemon on virtual/physical machine.

This can be achieved by setting the vendor daemon attribute "ls_allow_vm", mentioned under lsvendor.c.

/*
* Virtualization support for vendor daemon.
* VM_ONLY - Vendor Daemon can be operated in Virtual machine only
* PHYSICAL - Vendor Daemon can be operated in Physical machine only
*/
FLEX_VM_TYPE ls_allow_vm = VM_ALL;

Specifies whether the vendor daemon is restricted to run only in a virtual environment or is restricted to run only on a physical machine. By default, the vendor daemon can operate in a virtual environment or on a physical machine.

To use the non-default values for the ls_allow_vm variable, you must have a set of vendor keys that provides for virtualization support.

Documentation Reference: "Programming Reference for License File–Based Licensing", Chapter-5 : "Customizing the vendor daemon".

2.) Restricting the client access to licenses.

This can be achieved through license file 'optional keyword' VM_PLATFORMS.

VM_PLATFORMS=PHYSICAL | VM_ONLY | VM_ALL

Enables you to specify whether feature usage should be restricted to virtual machines or restricted to physical machines.

If the VM_PLATFORMS value differs in any way between two INCREMENT lines for the same feature name, they are pooled and counted separately.

Documentation Referance: Programming Reference for License File–Based Licensing, Chapter-8 : "License File Syntax".