Final answer:
Licensing can lead to dependency on the licensee's commitment, risk of imitation by the licensee, and may be a barrier to entry in certain industries. Governments believe the standards assured by licenses are beneficial despite these downsides.
Step-by-step explanation:
One of the common problems with licensing is that the success of the license often depends significantly on the licensee's commitment to the product or service and their ability to effectively commercialize the innovation. A licensee may lack the commitment or resources to maximize the potential of the licensed property, which can result in underperformance and reduced profits for the innovator.
Licensing also entails a risk of the licensee imitating the innovator's invention, knowingly or unknowingly contributing to increased competition. Furthermore, in contrast to patents, occupational licenses can represent a barrier to entry to certain industries, potentially leading to higher consumer prices and reduced choices due to decreased competition. However, governments maintain that the benefits provided by licensing, such as the assurance of a professional standard, often outweigh these negative aspects.