In short, if PADS is not running, it's no longer communicating with the license server. The license server will check TIMEOUT or TIMEOUTALL to determine when it should check in licenses from clients that are no longer active.
The standard request for TIMEOUT usually relates to when an application is running but has become "idle". We don't have an idle state in PADS so the connection to the server is always active when the application is running. Sorry if my previous response was confusing.
Guy