Thanks for the update.
Yes, your understanding is correct. It's not possible to regain the activation and network seats used for the license which has been cloned and become unusable.
As Fully Qualified Domain Name (FQDN) is the complete domain name for a specific computer/ or host on the Internet, the option 'FQDN' available under Clone Protection make sure that the VM doesn't get cloned till the FQDN of a VM machine running on a domain remains same. This is recommended for the scenaio where VM live migration is required.
This option has to be set while creating the product. Please refer to the topic 'Values Returned for Clone Protection' available under 'Admin API > XML Tags > Values Returned for Clone Protection' in LDK Toolbox Help.
Hope it helps !
Regards,
Gaurav Bhanot