Infringement Chapter Fifteen

In 1950, De Beers had a worldwide monopoly on the production of natural diamonds. It directly controlled all the pipe mines in the world-- there were only seven, and they were all in southern and central Africa-- and it had arrangements, either direct or surreptitious, with the governments of all the major diamond-producing countries to buy whatever diamonds were found in those regions by native diggers or fortune hunters. It also had the financial and political resources to preemptively buy out any new diamond discovery in most parts of the world.

There was, however, another threat to the diamond invention that emerged that year: the possibility that diamonds could be produced in a laboratory or even a factory. A team of scientists at the De Beers Research Laboratories had come to the conclusion that it was only a matter of time before a process was found for synthesizing diamonds. They had received information that both the United States and the Soviet Union were encouraging research aimed at mass producing industrial-grade diamonds. Converting carbon, which was one of the most common of all substances on earth, to diamonds was basically an engineering problem. It required constructing a vessel strong enough to withstand the heat and pressure necessary for inducing the synthesis. In a meeting with Sir Ernest Oppenheimer, they had themselves argued that advanced metallurgic alloys and high-pressure physics made the solution of this problem inevitable. They proposed that De Beers itself take the lead in developing this diamond-making technology, then through patents and licenses attempt to control synthetic diamond production. They warned that if an outside party made the breakthrough, De Beers might lose its monopoly position.

Sir Ernest had listened patiently to their arguments for a crash program on diamond synthesis. Then, after considering the matter, he turned them down, and said, "Only God can make a diamond." His dogma notwithstanding, his scientific assessment of the situation proved wrong. Within two years, a diamond was produced in a laboratory in Sweden.

For at least 300 years scientists had experimented with the conversion of carbon to diamonds. For example, as early as 1694, Florentine academicians gathered around a terrace to witness the following experiment: A magnificently cut diamond was placed in a crucible under a powerful glass lens. As the sun's rays focused on it, it began giving off acrid black vapors. A few minutes later, it disappeared in a cloud of smoke, leaving not a trace of diamond in the crucible. The academicians suggested that the diamond was pure carbon, and under the fiery heat it had turned to the gaseous form, carbon dioxide. But they could not prove this assertion.

A century later, an English chemist, Smithson Tennant, burned a diamond in a sealed vessel filled with pure oxygen. It also decomposed into an acrid vapor. Through chemical analysis, Tennant was able to determine that this vapor was carbon dioxide, and that the weight of the carbon in the vapor exactly matched the weight of that of the diamond that had vaporized. From this and other experiments, it was scientifically established that a diamond was carbon.

If diamonds could be transformed through a simple chemical reaction into carbon, it followed that carbon, through a reverse process, could be converted to diamonds. From the nineteenth century onward, the idea that the commonest of elements, carbon, could be turned into rare diamonds in the laboratory intrigued both scientists and confidence men and led to a wide range of experiments as well as dubious claims.

In 1880, a twenty-five-year-old Scottish chemist named James Ballantyne Hannay, working in a laboratory in Glasgow, attempted to achieve this sought-after synthesis by exploding carbonaceous material. He first sealed a mixture of powdered carbon, bone oil, and paraffin in coiled tubes, and then placed the tubes into a furnace. When the heat and pressure built up sufficiently, the tubes exploded and splattered the furnace walls with white-hot debris. After waiting for the furnace to cool, Hannay carefully scraped a number of minute particles off the sur~ace with a tweezers and found that these specks scratched glass-one test of a diamond. Triumphantly, Hannay claimed that he had manufactured diamonds and sent about a dozen specimens to the British Museum of Natural History in London.

At the time, however, most of Hannay's contemporaries doubted that he had, in fact, achieved the synthesis of carbon to diamond crystals. Some scientists argued that he had mis-analyzed the crystals that had resulted from his experiments as diamonds, and others openly insinuated that Hannay had himself put the diamonds into the tubes to fraudulently create a reputation for himself. Since the crystals that Hannay claimed were produced through his process were too minute to be used in either jewelry or industrial tools, the issue of whether or not these were authentic diamonds remained a purely academic one. More than a half century later, however, Hannay's crystals were rediscovered by the British Museum and, under X-ray analysis, proved to be diamonds of an extremely rare variety called "Type II." The fact that Type II diamonds were not generally recovered from mines at the time of Hannay's experiments indicated that he had indeed manufactured them.

Hannay was not the only experimenter in the nineteenth century who claimed success in synthesizing diamonds. In both Russia and France, scientists achieved similar results in the laboratory by applying heat and pressure to carbon. They were not able to persuade their peers, however, that the microscopic crystals their ingenious experiments yielded bore more than a passing resemblance to diamonds. The main effect of these early experiments was to induce an element of fear in the bankers who had invested heavily in natural diamonds. In 1905, for example, a self-styled French inventor named Henri Lemoine informed Sir Julius Wernher that he had discovered a process for mass-producing gem-sized diamonds from lumps of coal. Sir Julius, a British banker who was one of the four life governors of De Beers Consolidated Mines, feared that unless such an invention were brought under control it would wreck the diamond industry. Even the mere rumor of its existence could cause a selling panic among the investors in De Beers. Under these circumstances, he decided that there was only one prudent course of action: He would demand a demonstration, and if the invention worked, he would buy it-and then delay or suppress it.

Lemoine proved most cooperative. He agreed to sell the invention in exchange for a royalty and money to further develop it. He also invited Sir Julius to his laboratory in Paris to witness personally the synthesis of gem-sized diamonds.

Several weeks later, Sir Julius arrived at the Paris laboratory, which was located in the basement of an abandoned warehouse. He was accompanied by Francis Oats, the top executive at De Beers, and two other associates. Lemoine seated the group around a huge furnace and then left the room.

A few minutes later, the French inventor reappeared stark naked. He said that he had removed all his clothes so that they could see that he was concealing no diamonds. Then, like some medieval alchemist, he proceeded to pour various unidentified substances into a small crucible and mix them together. After displaying the mixture to the four gentlemen from London, he placed it in the furnace and threw a number of switches.

As the furnace blazed away, the naked inventor stood in front of it, and explained that the key to the synthesis was the secret formula of the ingredients in the crucible, which lie could not disclose. Then, after a quarter of an hour, he turned the switches off. Reaching into the furnace with a pair of tongs, he removed the white-hot crucible and placed it on a table in front of the men.

After it had cooled, he stirred the concoction with a pair of tweezers, and began plucking out from it well-formed though relatively small diamonds. In all, he produced some twenty gem diamonds, which he passed around for the group's inspection.

Peering at them, one after another, through his jeweler's loupe, Francis Oats found that they curiously resembled in color and shape the diamonds that were extracted from De Beers Jagersfontein mine in South Africa. Highly skeptical of the demonstration, Oats then demanded that Lemoine repeat the procedure.

Without any objections, Lemoine mixed another batch of ingredients in the crucible, and again cooked it for fifteen minutes in the furnace. This time he extracted from the smoldering brew thirty gem diamonds.

After examining this second batch of diamonds with their loupes, Sir Julius conferred with Oats in private. Oats suspected that the whole experiment was nothing more than a hoax. Sir Julius understood Oats' doubts, but believed that there was still some chance that this French inventor had stumbled on the secret formula for diamonds. He therefore offered to advance Lemoine money to develop his invention on the condition that its existence remain secret.

Over the next three years, Sir Julius gave Lemoine 64,000 pounds sterling, an enormous sum of money. In return, Sir Julius received an option to buy the secret formula which had been deposited by Lemoine under seal in a London bank.

In 1908, however, a Persian jeweler admitted that he had sold Lemoine a supply of small, uncut diamonds from the Jagersfontein mine that exactly matched the description of the diamonds that had supposedly been manufactured in the furnace. Lemoine was then indicted and brought to trial for defrauding Sir Julius of 64,000 pounds sterling. Despite his continued protestation that his invention worked, Lemoine was unable to duplicate his experiment for the court, and when his secret formula was unsealed by court order it was no more than a mixture powdered with carbon and sugar. Before the court could pass judgment on him, Lemoine fled the country.

In 1948, Soviet scientists began to experiment with the concept of growing diamond crystals from "seeds," just as rock candy crystals are grown from a single molecule of sugar. To accomplish this end, a minute fragment of diamond was bombarded by carbon iodine gas, and gradually, carbon molecules attached themselves to the structure of the diamond "seed," thereby enlarging the crystal. These experiments were conducted at the time under a veil of complete secrecy.

Meanwhile, in Sweden, engineers at ASEA, an engineering company, focused their efforts on constructing a hydraulic press which could produce the enormous pressures necessary for the synthesis of diamonds. They used six cone-shaped pistons which, when they came together, formed a perfect sphere. Although the attempts to convert carbon in the form of graphite into diamonds in this press failed, the engineers succeeded, in 1953, in converting a mixture of iron and carbon into some forty diamond crystals. ASEA executives decided, however, to keep the results secret while they developed a more commercial process for directly converting graphite to diamonds.

The real engineering triumph came in the United States, however. In Schenectady, New York, a team of research scientists at the General Electric Company devised a hydraulic press which was far more powerful than the one in Sweden. It had the ability to generate pressures of more than a million pounds per square inch, and its tungsten carbide walls could contain temperatures of over 5000 degrees Fahrenheit. Equations worked out at Oxford by Sir Francis Simon and R. Berman had predicted that at these pressures and temperatures graphite would be directly converted into diamond crystals.

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 X-ray 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. The next problem for the General Electric scientists and engineers was to invent a commercial process through which these diamonds could be manufactured more cheaply than equivalent diamonds extracted from a mine. They began experimenting with different catalysts-nickel, iron, tantalum-which when placed in the press with the graphite would allow the reaction to take place faster and at less cost in terms of energy expended. By the end of the year, the engineers had designed a system of belts and presses that would continuously turn out diamonds at costs competitive with those of producing natural diamonds.

Up to this point, the General Electric experiments had been a closely guarded secret, but in February of 1955 General Electric decided to issue a press release outlining its achievements in diamond synthesis. Suddenly, the world knew that diamonds could be easily manufactured.

The shares of De Beers stock plummeted after the news of the General Electric invention. To be sure, General Electric's diamonds were too small and discolored by the catalyst to be used as gems, but as General Electric spokesmen had pointed out, they were perfectly suitable for industrial purposes such as grinding and shaping tools. Since these "Industrial" diamonds had accounted for one-quarter of its total profit, De Beers faced potentially disastrous competition from this American industrial giant. Even though General Electric had not yet claimed the capacity to synthesize larger and better quality diamonds, many investors feared they soon would.

De Beers outwardly attempted to maintain a facade of world patents before the South Africans did. In mid-September, the Administration acceded to this urgent request, and General Electric took out the patents on its technology for synthesizing diamonds. The science of diamond-making was no longer secret.

De Beers, even though it was five years behind General Electric in perfecting the commercial manufacturing process for diamonds, was not yet defeated. It still possessed a worldwide marketing network for industrial diamonds and vast financial resources. 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. It then entered into a series of cross-licensing agreements with General Electric which made it difficult, if not impossible, for other companies to compete in synthetic diamonds. To further enhance its position, Harry Oppenheimer arranged to buy the Swedish factory from ASEA, as well as all its patents and technology. By 1961, in addition to the Swedish presses, De Beers had seventy-five hydraulic presses in operation in South Africa squeezing out diamonds, and then it opened another factory in Shannon, Ireland. De Beers called its synthetic diamond division Ultra High Pressure Units, Inc.

While De Beers and General Electric were dividing up the markets in the Western world, the Soviet Union created its own massive synthetic diamond industry in Kiev. The Soviets used the basic General Electric process, but they built the hydraulic presses on a much larger scale. As a result, the Soviets had a capacity to manufacture over 10 million carats of diamonds a year.

By the mid-1960s, the diamonds pouring out of synthetic presses in South Africa, the United States and the Soviet Union were measured not in carats or ounces but in tons. Initially, man-made diamonds were not larger than bits of sand and were used almost exclusively as abrasive grit for grinding wheels and diamond saws. Gradually, however, techniques were developed for bonding the minute crystals of diamonds together into larger units that were used for a large range of industrial purposes. Indeed, except for drilling bits and wire-drawing dies, which still required natural diamonds, synthetic diamonds were adapted for most industrial purposes.

Again the diamond invention was threatened. In October of 1966, Harry Oppenheimer flew to New York where he met with William Courdier, the General Electric executive in charge of synthetic diamond production, and other senior General Electric executives. Because of American antitrust laws, however, General Electric refused to go along with any strategy for coordination or controlling of synthetic diamonds. De Beers had to find new means of protecting its invention.

By 1970, more than half the diamonds produced in the world were man-made. Unlike prices for gem diamonds, which rose steadily during the postwar period, the prices of industrial diamonds dropped sharply. If it were not for the fact that the world's consumption of industrial diamonds had actually quadrupled between 1955 and 1970, and a host of new uses had been found for diamond abrasives, natural diamonds would no doubt have been wholly replaced by synthetic ones. Even with this vast expansion of the market for industrial diamonds, the price fell to less than 50 cents a carat for diamond abrasives.

Furthermore, in the midst of this heated competition, Dr. Bernard Senior, one of the four scientists who achieved the diamond synthesis for De Beers, resigned from De Beers laboratory with the intention of going into the diamond-making business himself. Since his employment agreement prevented him from competing with De Beers in South Africa, Dr. Senior moved to the island of Mauritius and established there the Southern Cross Diamond Company for the purpose of manufacturing diamonds. In response to this new threat, De Beers quickly moved to impound Dr. Senior's bank accounts in South Africa, and placed great, and in some cases irresistible, pressure on companies in South Africa not to ship Dr. Senior the supplies he needed for his factory. In addition, it filed a large number of legal actions designed to harass Senior's company. Eventually, because of such actions, the Southern Cross Company ceased to be a serious threat to De Beers.

There was, however, further disturbing news from America. General Electric announced in May 1970 that its scientists had accomplished De Beer's worst nightmare. They had synthesized gem-quality diamonds that weighed over one carat. Even the scientists conducting the experiment were surprised by the incredible results. The synthesis required, it was explained, two distinct phases. First, graphite was converted in an ordinary hydraulic press to diamond crystals no larger than a grain of sand and weighing only 1500th of a carat. Then, in the second stage of the process, these crystals were put at either end of a metal tube which also contained a carbonaceous solution. The tube was left in a specially constructed hydraulic press that could maintain enormous heat and pressure for as long as a week. Under these conditions, the carbonaceous solution became unstable and released carbon atoms, which would eventually move to the cooler ends of the tube and attach themselves around the diamond "seed." Gradually, the crystals would begin to grow in size. After 167 hours, when the press was opened, there were blue-white diamonds of gem quality that weighed between .60 and 1.1 carats. Presumably, if the press had been kept closed longer, the crystals would have grown even larger. The General Electric vice-president for research and development summed up the achievement as a "goal that has tantalized and frustrated scientists for nearly two centuries. . . . This comes very close to fulfilling the dreams of alchemists."

Under closer scrutiny, it was found that the General Electric diamonds were not of perfect quality, but they were equal, if not superior, to most commercial-grade gems. After they were cut and polished, these man-made diamonds could not be differentiated from natural diamonds by the naked eye. In fact, even an expert, using a jeweler's loupe, could not discern any difference. (The only telltale difference between the General Electric diamonds and natural ones was that the former tended to phosphoresce under an ultraviolet lamp, whereas the latter tended not to.)

De Beers reacted to the synthesis of gem diamonds in the same calm tone in which it had reacted fifteen years earlier to the synthesis of industrial diamonds. It claimed that it had known for "several years" that gem-sized diamonds could be created under laboratory conditions, but that since the cost of production would be "many times greater than finding and obtaining the natural product," it was convinced that such a synthesis would prove to be "economically impractical." Publicly, De Beers insisted that it would not alter its "plans for the future."

General Electric also attempted to reassure American diamond dealers that General Electric was not about to flood the market with synthetic gem diamonds. Its spokesman told dealers: "Keep your diamonds. . . . We are not competing. We have no reason to harm the diamond industry."

Despite these disclaimers, General Electric had evaluated the feasibility of manufacturing gem diamonds. It eventually decided against it for two reasons. First, there was a problem of what economists call "opportunity costs." Manufacturing gem diamonds required tying up the press for nearly a week. In that same period, the presses could produce batches of powdered diamonds for industrial purposes every three minutes. Even though diamond powder could be sold for roughly only one percent what gem diamonds could be sold for, it would still be far more profitable to use the press for powder rather than gems.

To be sure, General Electric recognized that it would be possible to develop catalysts that would accelerate the time needed to produce gems and to engineer more efficient presses that would allow more diamonds to be grown in the same cycle. However, even if it were possible to mass-produce gem diamonds at costs comparable to those of industrial diamonds, there would be a more serious problem. If the public realized that diamonds could be manufactured in unlimited quantities in a factory, the entire market for diamonds might suddenly collapse. A senior General Electric executive who was involved in the decision not to manufacture gem diamonds explained to me, "We would be destroyed by the success of our own invention. The more diamonds that we made, the cheaper they would become. Then the mystique would be gone, and the price would drop to next to nothing." General Electric decided not to invest hundreds of millions of dollars in presses to produce gem diamonds. Although their chief rivals had decided not to go ahead with manufacturing, it now became a war against time for the De Beers cartel. The science and technology that made it possible to manufacture real diamonds threatened to create a supply of diamonds that was beyond the control of De Beers.

The diamond invention, which had given value to diamonds for more than a half century, could survive only as long as this new invention, diamond synthesis, did not become commercially feasible. De Beers thus set out to retard it through secret agreements and financial interventions.