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Allowing another firm, for payment, to make use of a ‘patent or trademark. This is a method of profiting from a patent without the need to advantage of licensing over sale of the nai-pnt io that ic aii^wc tho inT,advantage of licensing over sale of the patent is that is allows the inventor to retain ownership. Licensing is also used by firms to shift profit to low-tax jurisdictions by requiring subsidiaries in high-tax jurisdictions to pay a licence fee, and locating the subsidiary receiving the fee in a low-tax jurisdiction. See also Base Erosion and Profit Shifting (BEPS); tax avoidance.

Reference: Oxford Press Dictonary of Economics, 5th edt.