If we implement product activation functionality with the Nephele monthly subscription service, are our customer licenses also limited to monthly subscriptions?

No – you can issue licenses of any duration, with any features and quota limits – so long as you’re aware that your end customer installation won’t be able to talk to the Nephele service after your subscription is terminated. This does mean that you can issue perpetual non-leased licenses while your Nephele subscription is in effect, and the licenses will continue to function after you cancel your subscription.