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"Invention" doesn't fit either. Melkor and the Balrogs were Ainur, beings of the same order, and although Melkor was mightier, Balrogs existed independent of him. He corrupted them, and maybe played a part in their incarnation, but credit for the "invention" of all Maiar goes exclusively to Eru.
I don't recall any mention of Melkor "trapping spirits" inside bodies, but I am pretty rusty. Could you provide some text to that effect?
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