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THE DIAMOND INDUSTRY

THEFT OF INTELLECTUAL AND NOT JUST PHYSICAL PROPERTY
BECOMING WIDESPREAD IN THE DIAMOND INDUSTRY

 

A detailed report appearing in Israel’s respected Ha’aretz daily revolved around a topic that is not often discussed in the diamond industry – intellectual property. The subject of the article was the country’s most renowned developer of technology for the sector, Sarine Technologies, a publicly traded company that is best known for devices to plan, analyze and grade rough and polished diamonds. The company is headquartered in the town of Hod Hasharon, north of Tel Aviv.

Possibly more than any other technology developer, Sarine can be credited with transforming diamond manufacturing, changing production methods that previously were the same as those used in diamond cutting and polishing 400 years ago. Using sophisticated optics first developed for the colored gemstone, it created computer-aided design (CAD) or planning devices, by which manufacturers could plot the best way to cut and polish a rough stone, before ever placing them on the wheel.

Prior to Sarine, manufacturing decisions needed to be taken by highly trained polishers, who often oversaw the processing of the stone from start to finish. The introduction of CAD technology in the diamond cutting plant allowed to for the introduction of less-skilled workers, carefully following instructions provided to them by operators of the CAD systems, and the more wide-scale introduction of automated or computer-aided manufacturing (CAM) systems. Sarine also allowed for companies in high-wage centers like Antwerp and Tel Aviv to run and operate plants in lower-wage centers like India and China, without relinquishing critical control of how individual stones may be cut.

In the diamond industry, a technology pioneer like Sarine was a success story. In 2021, the company reported sales of $62.1 million, and profits of $16.5 million.

But success breeds copycats, and, as the Ha’aretz article points out, Sarine has been plagued by competitors using technologies not only similar to those it has been developing, but essentially cloned devices, where Sarine’s intellectual property has allegedly been stolen.

Sarine transformed diamond manufacturing. It created computer-aided design (CAD) or planning devices, by which manufacturers could plot the best way to cut and polish a rough stone. The introduction of CAD technology in the diamond cutting plant allowed for the introduction of less-skilled workers, and the more wide-scale introduction of automated or computer-aided manufacturing (CAM) systems.

CATCHING AND CONVICTING THE COPYCATS

Much of the intellectual property theft has been perpetrated in India, which also happens to be the market where most of Sarine’s clients are located. According to the Israeli company, the largest of the copycat operations has produced some 1,200 machines, which essentially are exact replicas of the originals.

The Israeli company did not take this all passively, hiring teams of lawyers and private investigators, who discovered amongst other things that copycat operators had hired Russian hackers to obtain copies of Sarin’s proprietary software. According to the Ha’aretz article, a recording was obtained of one of the Indian forms’ owners admitting that this type of theft had actually taken place.

Catching and convicting the perpetrators is more complicated, but some successes have been chalked up. After several Sarine employees were approached on LinkedIn and offered $1 million to reveal their company’s patents, a sting operation was set up. The bribers were lured to Israel, and then arrested when they attempted to make a $200,00 advance payment. One was sentenced to eight months in prison.

But the experience has been expensive. Sarine says that the cost in loss revenue is about $10 million per annum, and it has already spent another $5 million in legal and other costs defending its intellectual property rights.

 

PROTECTING PROPRIETARY CUTS

Most of the effort in protecting intellectual property in the industry has focused on the patenting of cuts and registering of trademarks, and even then such efforts are more the exception rather than the norm.

One of the first cuts to be associated with a specific company or individual was the Asscher Cut.

 

The Asscher Cut.

 Octagonal in shape, with three step-cut rows on the top and three on the bottom, it features a total of 58 facets. It was developed in Amsterdam in 1902 by Joseph Asscher, the same individual who achieved fame by cutting the Cullinan, the largest rough diamond in history. But the cut was never patented and thus was copied, even though it retained the name of its developer.

Two generations later Asscher’s descendants decided to carve out some intellectual family property. Since the original design was now in the public domain. Joseph’s grandson Edward patented a variation of the cut, with 16 more facets for a total of 74, located in two additional rows of eight facets on the pavilion of the stone.

But since the cut was patented, its name needed to be changed. Thus was born the Royal Asscher.

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