A sudden increase in patented or proprietary cut diamonds hit the market around 2000 following the announcement of the De Beers’ Supplier of Choice program. The new initiative began linking sightholders’ ongoing supply of rough diamonds to them adding value to the consumer channel by branding and actively marketing their own products.
De Beers’ research discovered that consumer spending on diamond jewellery lagged significantly behind other luxury consumer spending so its Supplier of Choice strategy was designed to coerce diamond manufacturers to take some responsibility for promoting diamonds, rather than leaving the entire industry marketing to De Beers.
In order to continue receiving ‘rough’ from De Beers, sightholders had to market downstream to retailers and consumers. For many diamond manufacturers who had only produced generic rounds and princess stones, one way to achieve guaranteed supply was to launch and market new diamond brands and/or cuts.
The new policy resulted in an increase in registered trademarks, with manufacturers attempting to create a marketing or branding difference even if there was little or no difference in the end product to the consumer.
On the other hand, some manufacturers set out to invent new cuts as a way to create a unique product that could be protected via patents and other intellectual property rights.
However, many of these new cuts failed to gain market penetration and effectively vanished as quickly as they arrived. Only a few manufacturers have stood the test of time in this competitive segment of the diamond industry, and one is Lili Diamonds.
The company was started in 1981 by three Israeli bothers (Jacob, Itzak and Avraham) who, from the outset, identified a niche for ‘unique’ diamonds; first specialising in square shapes with the ability to supply many matching stones of the same quality for jewellery designs such as tennis bracelets.
In essence, Lili Diamonds sought to be a one-stop shop for fancy cuts, providing customers with perfect diamond layouts, designed for inlaying into rings, bracelets and necklaces.
Managing director Dotan Siman-Tov, son of Jacob, explained that his father and two uncles decided not to manufacture round diamonds and instead chose to focus on straight-edged stones.
“More than 95 per cent of diamond suppliers manufactured round stones, but you need to have something else. So we decided to go with the square shape like the cushion, emerald, asscher, the baguette and princess, and we created layouts. We hold a big stock here, and if somebody calls and says they want 50 pointers in cushion layout for a tennis bracelet, and they need to be 4.5–4.6 millimetre, FG colour and VS1, we will have the goods already here.”
According to Siman-Tov by focusing on a specific niche and holding a large inventory, a customer can source all the required stones from one supplier rather than a parcel of mixed stones from different manufacturers.
“That means our service is very quick, and it’s not something that a lot of companies have [large inventory] in the square shape. This is what I call the ‘bread and butter’ of the company,” he says.
Along the way the company began exploring proprietary cuts, and in 1996 launched its first patented diamonds – the Crisscut and Lily cut.
The company has since developed four more internationally patented stones: Crisscut Cushion, Orchidea, Wonder and the Meteor in 2010, a decagonal-shaped diamond with 10 straight walls built of 71 facets.
“The Meteor took 10 months of diligent work and persistent attempts to overcome the technical challenges and it was launched on 10/10/10,” Siman-Tov explains.
He agrees that the industry saw a sudden increase in new diamond cuts beginning around 2000, and he isn’t surprised that many were not successful.
“There are several other successful patent diamonds other than Lili Diamonds around the world, but many suppliers found that it’s one thing to invent it [a new cut] and another thing to market it and that’s not easy. There is a story to build for each stone.
“So for us it’s important that when we polish the stone, it has to be different. I mean, okay it’s unique; nobody else has it. It has different facets but the brilliance and the fire that the stone has still needs to be 100 per cent, because otherwise, for us if the stone doesn’t have - what we call in the language of manufacturers ‘life’ - then it’s not something that we believe that somebody can sell.”
The investment needed to ensure the success of patented stones is not just in the marketing; the real costs start with the initial design and development, which can take years.
While Lili Diamonds has six worldwide diamond patents, the company has at least 20 other designs that Siman-Tov describes as being ‘in the safe’ because “we are waiting for the right client to match the design or we are not so satisfied with them.
“If I look over, say, 20 years ago when we started creating patented stones, the effort and the money that you need to put into marketing and pushing these brands is a great deal; a lot! And some people want to see the results very quickly, and it’s not something that you see quickly. At least you need to be with the stone [marketing] for five, six or seven years. They try to build a reputation for the stone,” he says.
The major problem that many suppliers discovered was that the investment in the new cut would take some time to design and develop, but at that point, it’s just another stone. Once the new cut was completed, the marketing had to begin, and that was another cost.
In the flurry of activity to get new diamond cuts to market in order to appease De Beers, many manufacturers encountered another problem: the new cuts were effectively the shape of a round stone with some changes to the facets.
“When a consumer looked at a ring [with a patented cut] it looked like a round stone. The new cuts were not dramatically different to the average consumer, whereas our cuts are different because, for example, we have the Lily Cut and Orchidea that are like flower shapes and the Crisscut and the Crisscut Cushion are different facets than, let’s say, the regular emerald or regular cushion.”
Simply increasing the number of facets on a cut did not make it discernibly different to the average consumer: “So if you give one of our cuts to somebody that is not professional and you show them the stones, it would immediately be noticeable that it’s not a regular stone.”
This problem became apparent when the marketing of the new cuts involved a detailed explanation about why the diamond was different. If the new, patented cut had to be explained to customers, was it really that different after all?
Therefore, some of the new designs did not resonate with diamond buyers and were not successful.
Another hurdle was the large legal expense incurred by manufacturers to register worldwide patents and trademarks in order to protect their intellectual property.
IP protection is not a cheap proposition and holds little value if not applied to all countries and territories. Some diamond manufacturers took this into account and viewed diamond patents as all too difficult.
Since the initial burst or fad of branded and patented stones a decade ago, the white diamond market has only become more competitive as the industry has faced challenge after challenge. The continuing commoditisation of product and, more recently, the increasing volume of synthetic diamonds flooding the market are some of these challenges.
However, this has only strengthened Lili Diamonds’ focus on market specialisation; its patented stones account for 60 per cent of sales and around 50 per cent of volume.
The patent division accounts for larger sales because, not only are the diamonds a higher dollar value, but because “we make them bigger sizes, 5 carat, 10-carat; regular shapes [they] almost don’t manufacture,” Siman-Tov explained.
While Lili Diamonds is based in Tel Aviv, Israel, it has offices in New York and Hong Kong. The company promotes its products heavily, attending all major jewellery trade shows including JCK Las Vegas, Hong Kong and Bangkok jewellery fairs and in Japan.
The founding brothers still work in the business, with the 71-year-old father Jacob in charge of the Tel Aviv factory that boasts around 100 staff, with Itzak and Avraham responsible for polishing and marketing.
Dotan followed in his father’s footsteps, joining the business in 2004 while his older brother Shay, started in 1997.
In an era where businesses follow fashions and fads, often jockeying for any business they can get, Lili Diamonds has remained focused on its heritage and market niche thereby building an international reputation for creativity and the more unique side of the diamond industry.
Defining intellectual property and patents Patented diamonds may seem like a foreign concept to some. Here are definitions to key terminology when discussing ways to protect your creativity. Intellectual propertyAustralia has a Federal Government agency responsible for intellectual property laws, aptly called IP Australia. It defines IP as “the property of your mind or intellect. It can be an invention, trademark, original design or the practical application of a good idea.” In business terms, it refers to “proprietary knowledge” and helps protect a company’s ideas from competitors. PatentsPatent laws vary around the world, however in Australia it is defined as “a right granted for any device, substance, method or process, which is new, inventive and useful.” In acquiring a patent, the inventor or creator has the exclusive right to use their product for commercial or monetary gain. That said, artistic creations, mathematical models, plans, schemes and other processes that are essentially mental cannot be patented. TrademarkRegistration of trademarks and patents are two entirely different things that are often confused. IP Australia states: “A trademark can be a letter, number, word, phrase, sound, smell, shape, logo, picture, aspect of packaging or any combination of these.” Simply put, creators cannot trademark something that directly describes their goods, however they can trademark the logo, design or packaging of their product. DesignIP Australia defines design as “the features of a shape, configuration, pattern or ornamentation which can be judged by the eye in finished articles. Design registration is used to protect the visual appearance of manufactured products.” In terms of industrial or commercial designs, relevant to the jewellery industry, protection of products’ design only goes so far as its appearance and not how it works. It also does not cover artistic works. CopyrightResponsible for “protecting the original expression of ideas, not the ideas themselves,” copyright covers original works of art, literature, music, films, broadcasts and computer programs from copying.” |
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