The encryption license for IEEE1735 version 2 works without issues in Vivado 2016.3, but the following error occurs in Vivado 2016.4:
Starting in Vivado 2016.4, Xilinx has updated the licensing for IEEE 1735 Version 2. As a result, users will need to go back and generate a new license.
Please go to https://www.xilinx.com/getlicense and generate a new license for the 1735 Version 2 capability, and then rerun the flow.
Note: If you are requesting an encryption license for 1735 version 2 for the first time, please refer to (Xilinx Answer 68071).