Microsoft designed FAT originally and they've done the main modifications since then. It went FAT12 -> FAT16 -> FAT32/VFAT. Novell/DR did some twiddling to their FAT implementation in DRDOS but it never took off as Microsoft never implemented the same changes.

FAT32/VFAT expanded the size of the tables to accomodate larger disks and also introduced a kludge to store the munged up long filenames into multiple 8.3 directory entries.

A file with a long filename has several directory entries. One that has the short 8.3 name and a bunch of others to store the long filename. Since they've got to keep it compatible with old systems they made it store 10 characters of the long filename in each of the extra entries. The first character in the new entries is flagged as being a deleted entry so it should be ignored by anything that doesn't understand long filenames.

The license is for everything that involves FAT. Even if you only used the short 8.3 names then you'd have to pay the fee unfortunately.