I had developed a game intending to publish it as a paid application using the Android LVL with the default ServerManagedPolicy licensing policy. Now, the power
Not getting any answers here, I posted the same question on the Android Developers group. Here is the the best answer I got:
Technically the backend license servers allow it and return a large validity timestamp, BUT... The market publisher console will not allow you to upload an APK that's free and requests the com.android.vending.CHECK_LICENSE permission.
In practice, this means that free apps cannot use the LVL, because you won't be able to upload them.
Trevor Johns, Developer Programs Engineer, Android