Question : How does Windows terminal license work?

There is a production Windows 2003 terminal server with 10 CALs (TS1). I intend to add a standby Windows 2003 terminal server (TS2).
Normally TS1 is servicing TS clients.
TS1 and TS2 will NEVER service TS clients at any same time.
TS2 will be running so TS1 can replicate data to it. TS#2 will require its own Windows license but not sure if same number of terminal license is required.
If TS1 is down, bring up TS2 (terminal service) and servicing TS clients.
Q#1. Is it legal to run both TS1 and TS2 with terminal service ready?
Q#2. If not, is it legal do the following:
TS1 is running full terminal service, TS2 is running without terminal service.
When TS1 is down, transfer the terminal license to TS2 and bring TS2 as full terminal server?

Thanks.

Answer : How does Windows terminal license work?

1. Click Start, point to Administrative Tools, and then click Terminal Services Configuration.
2. Click Server Settings, and then double-click Licensing Mode.
3. Change the Licensing Mode to Per User, and then click OK.
Currently, Windows Server 2003 does not manage User CALs. This means that even though there is a User CAL in the license server database, the User CAL will not be decremented when it is used. This does not remove administrators from End User License Agreement (EULA) requirements to have a valid terminal server (TS) CAL for each user. Failure to have a User CAL for each user, if Device CALs are not being used, is a violation of the EULA.