De Beers loses big time in the Singapore courts

RN Bhaskar

For many diamond industry watchers, De Beers was always too big a player to pick up a fight with.  It has eliminated competition ruthlessly, as the following paragraphs will show.  At times, it has also promoted proposals that conceal its real intent.  And at times, it has claimed patent rights over products and processes what were based on misleading claims, or figments of the imagination, depending how you look at De Beers.

The diamond cartel known as De Beers received a rude setback from the Singapore courts on Friday, February 17, 2023,  That is when The Singapore Court of Appeals rejected the claim of Element Six, part of the De Beers group, that it held patents that should be enforced against IIa Technologies, a Singapore based company, and one of the largest producers of lab grown diamonds in the world.

Element Six/De Beers lost its first patent on February 7, 2020, when the Honourable Justice Valerie Thean found that its Singapore patent number 110508 (“SG508”) was invalid and ordered the patent to be revoked. SG508 related to the heat treatment of CVD diamonds to change its colour.  Details of this revocation can be found at https://www.2atechnologies.com/post/iia-technologies-successfully-invalidates-key-element-six-patent.

De Beers/Element Six then went on to defend its other patent, in order to ensure that the IIa manufacturing facility was shut down.

However, on 17 February 2023, the Singapore Court of Appeal comprising the Honourable Chief Justice Sundaresh Menon, Justice of Appeal Judith Prakash and Justice of Appeal Steven Chong unanimously found that the other Element Six’s patent in the suit, Singapore patent number 115872 (“SG872”) was invalid. It ordered the full revocation of the patent. SG872 concerned the production of CVD Diamond material for use as gems and in optical applications. A copy of the judgement can be downloaded from https://www.elitigation.sg/gd/s/2023_SGCA_5 . The Court of Appeal is the final appellate Court in Singapore. Its decision is final in this matter.

In its 126 page decision issued on February 17, 2023, the Court of Appeal found that SG872was invalid on two grounds of insufficiency and therefore should be revoked in full. In its decision, the Court of Appeal also overturned the High Court of Singapore’s finding of infringement.

Stated Prof. D. S. Misra, CTO of IIa Technologies “Not only have the patents been revoked but we are especially grateful that Court of Appeal has overturned the findings of infringement as well. While the past seven years have been long, we do feel fully vindicated now that the process has been finally concluded in IIa Technologies’ favor.”

The origins

The fight with IIa Technologies began when it decided to go against De Beers and begin manufacturing lab-grown diamonds.  That would have hit De Beers’ grip on the world of earth mined diamonds which it had covetously guarded for over a century.

In a desperate attempt to safeguard its diamond empire, Element Six of De Beers issued a statement (https://www.e6.com/en/about/News/IIA-Appeal)  claiming that it “holds several patents in many other jurisdictions around the world and the appeal decision represents a very surprising outcome in light of the findings from the initial litigation and Element Six’s well established international patent portfolio in this field. Element Six notes that the decision is specific to Singapore and does not apply in other jurisdictions in which it holds similar patents.e Beers had tried to ensure, time and again, that no player would enter the diamond market without its concurrence.”

Evidently, De Beers will try to muscle its way through in other regions, trying to prevent the proliferation of lab grown diamonds.  How this will play out in other regions, especially in India, will be interesting.  India, it must be said, has become a major hub for cutting and polishing lab grown diamonds (https://asiaconverge.com/2022/11/lab-grown-diamond-dreams-of-bakul-limbasa/).

A private army for mugging

In order to achieve this, it first created a private army under the leadership of Sir Percy Sillitoe. He was contacted by the office of Harry Oppenheimber (who headed the De Beers cartel) in December 1953.  Sillitoe was a key player in creating the private army that De Beers formed – meticulously documented by Edward Jay Epstein in his book on how De Beers created its diamond empire (http://www.edwardjayepstein.com/diamond/chap14.htm).

Epstein explains how “Sillitoe had been, until November of 1953, the head of the British counterespionage service known as MI-5. During the Second World War, he had organized one of the most ingenious spy operations in the history of espionage. It was called the double-cross system, and it involved converting all the German spies in England into British double agents. Since the Germans accepted the reports of these spies as bona fide intelligence, Sillitoe and his double committee, which included Harry Oppenheimer’s tutor at Oxford, Sir John Masterman, were able to feed the Germans a false picture of British activities. After the war, Sillitoe worked closely with American and French intelligence.”

“Sillitoe proposed that a few diamonds be radioactively “labeled” with an invisible [radioactive] paint and then be conspicuously left around in areas where employees were likely to steal them. Assuming that the radioactive bait would be snatched up, a Geiger counter would click the moment the diamond passed through the gates of the compound. The thief then would not be arrested but followed, and in time the radioactive diamond would be sold to an intermediary. The intermediary could then be followed with the Geiger counter. Once located, he could be turned into an informer,” explains Epstein.

Sillitoe along with De Beers hired a mercenary – Fred Kamil, a Lebanese trader who knew how to negotiate with smugglers. The idea was to use him as a bait to ambush people who tried to sell diamonds outside the De Beers network. “Many of the ambushes were bloody affairs. A caravan of a dozen or so Mandango tribesmen would emerge from the jungle in Sierra Leone and head for the bridge across the Mao River, which was the Liberian border. Suddenly, mines and flares would be detonated all around them. Then Kamil’s mercenaries would open fire with hunting rifles. The tribesmen, who were not hit, would instantly surrender, and turn their diamonds over to the mercenaries. It was a “diamond war,” Kamil later explained in his account of these exploits,” explains Epstein.

By 1957, says Epstein, Sillitoe decided that he had successfully completed his mission for the De Beers diamond cartel. He quietly disbanded his International Diamond Security Organization, though many of his agents and mercenaries continued working directly or indirectly for the cartel.  That was De Beers way on controlling the diamond markets.

The Kimberley process

By the 1990s, the De Beers cartel faced another challenge.  This time it was from Russia, which had begun to pump diamonds into the markets.  Many of them were cut and polished in India.  While no concrete evidence is available, many diamantaires say that De Beers pointed out such renegades from India to the country’s law enforcement agencies, who in turn picked them up, seized their consignments, and even imprisoned them.  In order to greater force to such law enforcement agencies, it managed to steer through the UN a move against what it called “blood diamonds”.  These were essentially diamonds sourced from outside the De Beers network.  Russian diamonds too got clubbed with such “blood diamond” categorisation.

In 2003, the De Beers cartel introduced the Kimberley Process Certification Scheme (KPCS) to prevent “conflict diamonds” from entering the mainstream rough diamond market by United Nations General Assembly Resolution 55/56 following recommendations in the Fowler Report (https://en.wikipedia.org/wiki/Fowler_Report). The process was set up “to ensure that diamond purchases were not financing violence by rebel movements and their allies seeking to undermine legitimate governments.” Using the UN resolutions, De Beers skillfully managed to get the consent of most diamond trade participants to adopt the KPCS. These included producers, exporters, and importers (including diamond cutters and polishers). This is a certification process ‘agreed’ upon by It requires all producers to offer to all players all data (that must be auditable) relating to where the diamonds were mined, or whether they were produced from illegal mines and unauthorised sources (https://asiaconverge.com/2011/05/what-you-didnt-know-about-de-beers-and-diamonds/).

As of December 2009, the KPCS had 49 members, representing 75 countries, with the European Community and its member states counting as an individual participant.

However, De Beers did not get its own diamonds through this certification process.  That led to charges that De Beers was the biggest dealer in conflict diamonds, and not surprisingly, there was an agitation outside the office of one of the largest sight holders of De Beers condemning the role of the cartel in peddling blood diamonds (http://www.inminds.com/article.php?id=10587) .

Today, the KPCs is almost ineffectual, and more countries began to understand the ‘duplicitous’ role that De Beers had been playing all along.

Lab grown diamonds

Then came the biggest challenge to De Beers.  The advent of lab grown diamonds.  Experimentation with growing diamonds in laboratories had been known of for several centuries (Read Epstein’s account at http://www.edwardjayepstein.com/diamond/chap15.htm).  But these were too small and expensive.  Then in 1954, the General Electric scientists began feeding graphite into the press. After enormous amounts of pressure were applied, they recovered minute diamonds-one millimeter in length. Under Xray examination, it became clear that the amorphous carbon molecules in graphite, which resembled a hairnet, had been rearranged under the heat and pressure into a tetrahedron diamond structure. These were not false diamonds; they were the same as mined diamonds. in February of 1955 General Electric decided to issue a press release outlining its achievements in diamond synthesis.  De Beers was alarmed.  After first attempting to litigate the patent rights, De Beers finally agreed to pay General Electric some $8 million plus royalties for the right to manufacture diamonds under the process invented by General Electric.

Then came Russia with its own version of lab grown diamonds.  And then came IIa Technologies, which introduced a process that was far more cost effective and could actually become a threat to the entire earth mined diamond business.

That would explain De Beers’ desperate attempts to stop IIa in its tracks by claiming patent infringement.

It could also explain why De Beers has been backing Standard Chartered in making life miserable for Jatin Mehta, because he was the visionary whose plans were implemented by his son in setting up IIa Technologies (https://asiaconverge.com/2022/07/jatin-mehta-sues-debeers-stanchart-kroll-for-5-bn/) in collusion with Standard Chartered Bank and Kroll Advisory (https://asiaconverge.com/2023/02/stanchart-tries-to-break-indian-bankingranks/). But Jatin Mehta is not giving up the fight.  It has filed a suit against the trio in the Surat Court (https://asiaconverge.com/2022/07/jatin-mehta-sues-debeers-stanchart-kroll-for-5-bn/).

Grant Thornton (GT) has now taken the fight to the UK courts, where too the next round of the battle will continue.  Dubious documentation is one of the issues that will crop up in these court battles as well.  De Beers has already lost the case in Antwerp against Jatin Mehta, where he was accused of switching earth mined diamonds with lab grown diamonds. On 22 February 2018 the case was closed by The Council Chamber of the Court of First Instance of Antwerp when no evidence could be produced.

Having lost the Singapore case, De Beers will find it increasingly difficult to throttle the lab grown industry.  Maybe, it had anticipated such an outcome, when it set up Element Six to make lab grown diamonds itself.  If you cannot defeat your enemies, it may be a good idea to join them.