I have two closely related questions:
Who first recognized that Morita equivalence was equivalence in the bicategory of Rings, Bimodules, and Intertwiners?
I've heard this bicategory called the "Morita bicategory". Who first called it this?
Here's what I've been able to figure out:
Morita introduced what now is called "Morita equivalence" in
Kiiti Morita. Duality for modules and its applications to the theory of rings with minimum condition. Sci. Rep. Tokyo Kyoiku Daigaku Sect. A, 6:83–142, 1958. MR0096700
He defined it in terms of equivalences of categories of modules, but proved that all equivalences of categories of modules are implemented by tensor product with a bimodule. (Also by homming from a bimodule.) It's worth also noting that Morita primarily discussed contravariant equivalences between various categories of modules satisfying some size conditions, rather than covariant equivalences between categories of all modules; his primary interest was on "dualities" $\hom_A(-,U)$ and $\hom_B(-,U)$ where $U$ is a fixed $A$-$B$-bimodule.
Eilenberg and Watts independently proved the theorem now named after them jointly, that colimit-preserving functors between categories of modules are given by tensoring with bimodules:
Charles E. Watts, Intrinsic characterizations of some additive functors, Proc. Amer. Math. Soc. 11, 1960, 5–8, MR0806.0832
Samuel Eilenberg, Abstract description of some basic functors, J. Indian Math. Soc. (N.S.) 24, 1960, 231–234, MR0125148
Bass gave an elegant survey of Morita's work and the Eilenberg–Watts theorem, focusing on applications to Wedderburn structure theory and the Brauer group in:
Hyman Bass, The Morita Theorems, Lectures given at the University of Oregon, 1962. PDF
That paper uses (and, as far as I can tell, introduces) the phrase "Morita context" for a pair of bimodules $_A P_B$ and $_B Q_A$ and bimodule homomorphisms $P \otimes_B Q \to A$ and $Q \otimes_A P \to B$, not necessarily invertible but satisfying that the two natural maps $P \otimes_B Q \otimes_A P \rightrightarrows P$ agree, as do the two natural maps $Q \otimes_A P \otimes_B Q \rightrightarrows Q$. I feel like I don't see the phrase "Morita context" very much any more, but perhaps this is due to a biased sample on my part.
The terms "Morita equivalence" and "Morita-invariant" appear (perhaps for the first time?) in
P.M. Cohn, Morita equivalence and duality, Queen Mary College Mathematics Notes, Queen Mary College, London, 1968 (lectures written 1966, republished with additional citations 1976). MR0258885
The notion of bicategory was introduced in:
J. Bénabou. Introduction to bicategories, part I. Reports of the Midwest Category Seminar, Lecture Notes in Mathematics 47, pages 1-77. Springer, 1967. MR0220789
He discusses in some detail the bicategory of Rings, Bimodules, and Intertwiners, and observes that it receives a functor (named "modulation" by Tang, Weinstein, and Zhu, 2007) from the category of Rings and Homomorphisms.
The canonical reference for Morita theory is another work by Bass:
Hyman Bass, Algebraic K-Theory, Benjamin, 1968. MR0249491
Notably, "Chapter II: Categories of Modules and their Equivalences". This book never uses the language of bicategories, which should not surprise: the book came out in 1968, which means it went to the publisher by 1967, which means that Bass at the time of writing didn't have Bénabou's paper. The book does, however, make the following observation: There is a (strict 1-) category whose objects are Rings and whose morphisms are Isomorphism Classes Of Bimodules, and Morita equivalence (not a term used in the book) is isomoprhism in that category. This almost answers Question 1, but not quite.
I then lose track of the citations, which seem to multiply quickly. It's clear that all ingredients were available by the end of the 1960s and reasonably well known by the mid 1970s (e.g. Bunge, 1979 was doing quite sophisticated category theory). Bounding from the other end, by Brouwer, 2003 the observation that Morita equivalence is best understood in terms of bicategories was routine.
