The Devil Take Hindmost

I'm reading Edward Chancellor's "The Devil Take The Hindmost." It's a "History of Financial Speculation." Maybe it's just confirmation bias, but it seems that just about everything I read these days has some interesting tidbit on the origin of corporations.

In the chapter discussing the events that led to the passage of the Bubble Act, it mentions all sorts of patents that were issued to establish commercial enterprises to carry out a specific form of commerce - from patents to raise shipwrecks to patents to produce imitation Russian leather. Some of the patents discussed clearly relate to what amounts to the commercialization of an invention while others definitely amount to business methods.

It is as if 17th century entrepreneurs faced a choice between organizing their business enterprise via patent or incorporation that is very similar to the choice between organizing as an C Corp, LLC or S Corp faced by 21st century entrepreneurs.


Of particular interest, the author writes: "the patent companies of the 1690s were not genuine attempts to apply scientific advances for commercial purposes: patents were registered without examination of their efficacy and were used by promoters as a convenient device to launch companies in the stock market while avoiding the time and expense of incorporation."

As far as I can tell, modern jurisprudence has forgotten the common ancestry of patents and corporations. By ignoring how and why each evolved into distinct bodies of law, we've ended up with all sorts of legal nonsequitors. For example, the federal doctrine of business method patents permit entrepreneurs to circumvent state business enterprise laws to obtain what in essence functions as a license to engage in a specific form of commerce very much similar to what Chancellor describes.

All sorts of 10th Amendment implications ensue.