This error can occur if you have previously used MDTools 965, Network Cloud License.
Steps to resolve the issue.
Go to C:\Users\Yourusername\AppData\Roaming\VEST\Embedded
Rename the existing MDTools900 folder to MDTools900-1 or other.
Reopen Solidworks and select Change License Type. Select Network, Local License and Enter the Server name and Port Number
You should now be able to get the license from the Local License Server Manager on your Network.