States solves better---Avoids ‘Uniformity costs’ and tailors laws to boost innovation

Compared to the centralized U.S. patent legislation model, a significant feature of China's semi-decentralized legislation model is that local governments cooperate in the building of the patent system by making local laws to meet specific regional needs, enhancing the adaptability of the patent system overall.204 Without local governments' input, centralized legislation to maintain uniform patent law across the nation could, as Michael Carroll points out, entail "uniformity costs" namely, under-protecting costly innovations and overprotecting those with lower innovation needs or alternative appropriability mechanisms.205 And like some other countries, China comprises a range of local development plans, traditions, and cultures.206 Granting legislative authority for patents to the local governments might be the ideal way to adapt to diverse local conditions. Part of the reason for this, as Friedrich Hayek pointed out, lies in the dispersed nature of knowledge.207 Informational deficiencies might keep the laws [*292] that the central government enacts from being responsive to local conditions.208 The semi-decentralized legislation model encourages participation, allowing provincial or city governments to use their local knowledge to make the legal system more adaptable to local conditions.

Another related benefit pertains to the geographically uneven distribution of industries. The U.S. has regional clusters of innovators in specific sectors, such as agricultural technology in California or orthopedic devices in Indiana,209 and so does China.210 Uniform national patents that the central government issues create incentives to develop innovations for broad market protection and monetization, but lack specific incentives for investing in innovations important to specific communities.211 Local governments can tailor their patent laws to cultivate regional clusters of innovators in specific sectors,212 or to encourage the pursuit of projects that directly enhance the well-being and quality of life of local residents,213 such as by providing stronger patent protection and enforcement measures. This approach can enhance investment in new technologies by promoting regional innovation clusters and supporting local public goods.214