State of Innovation

Patents and Innovation Economics

Corporations Have the Rights of a Person?

There has been a lot of anger at corporations lately and many people are wondering when and why the courts ever stated that corporations have the rights of a “legal person.”  The case Citizens United v. Federal Election Commission, recently overturned the limits on corporate spending on elections based on the idea that corporations have free speech rights under the 1st amendment.  This upset many people and many questioned why the court believed that corporations should have rights under the 1st amendment.  The crony capitalism of the Bush and Obama administrations has added to this frustration at corporations.  The British Petroleum Gulf oil spill debacle is adding fuel to the flames.  Is this idea that a corporation is a “legal person” with rights some sort of judicial activism?

The first US case to recognize that a corporation is a “person” for legal purposes, able to sue and be sued was Trustees of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 4 L. Ed. 629 (1819) (see http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=17&invol=518)

This 1819 case was really about the Contract Clause of the Constitution and in today’s world would be characterized as a property right’s issue.

“Trustees of Dartmouth College v. Woodward“, 17 U.S. (4 Wheat.) 518 (1819), was a landmark United States Supreme Court case dealing with the application of the Contract Clause of the United States Constitution to private corporations. The case arose when the president of Dartmouth College was deposed by its trustees, leading to the New Hampshire legislature attempting to force the College to become a public institution and thereby place the ability to appoint trustees in the hands of the governor. The Supreme Court upheld the sanctity of the original charter of the College, which pre-dated the creation of the State.  (http://en.academic.ru/dic.nsf/enwiki/101008)

Since the case did not revolve around whether a corporation was a “legal person” it is my opinion that this was a generally accepted principle in the legal community at the time.  As this case shows, if corporations are not treated as a “legal person” then the government will use this as an excuse to violate private property rights.  The idea that a corporation is a “legal person” is not new and makes sure that private property rights are not violated.

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June 3, 2010 - Posted by | -History, Innovation | , , ,

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