Final answer:
Licensing is the permission granted by one company to another to use a specific form of intellectual property like patents or copyrights, often for a fee, while maintaining the original rights.
Step-by-step explanation:
The granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions is known as licensing. Intellectual property rights, like patents and copyrights, allow companies to maintain exclusive control over their innovations and creative works.
A patent, for example, gives the inventor the exclusive legal right to make, use, or sell the invention for up to twenty years. Should the patent holder choose to allow another company to use the patented technology, they can offer a license, which is essentially a legal agreement granting permission to use the invention while the patent is still in effect, often in exchange for a licensing fee or royalties.
Without such rights, companies could face competition that would limit their profits to normal rates, thus reducing the incentive for innovation. Copyright serves a similar function for protecting original works of authorship, including books and music, giving the author an exclusive legal right over the use of these creations.