The Software Pirates of Surat
March 04, 21
There's more than one way to get your diamonds scanned in Surat. Orthodox business practice is to buy a legitimate machine and license its software on a "pay as you go" basis. The alternative is to seek rough planning and inclusion mapping services elsewhere at a lower cost - using pirated software run on counterfeit machines. Diamond manufacturers in the cutting and polishing capital aren't so brazen as to actually have the technology on their premises. Instead, they send their diamonds, and very often their workers as well, to outside facilities with pools of machines to get them scanned. Sometimes they have specific machines set aside for their own use. The financial benefits are significant - using pirated software costs less than doing it legitimately - and the practice has caught on with quite a few polishers.
In January, a team of some 50 tax officers carried out a raid on Diyora & Bhanderi Corporation (DBC), which describes itself on its Facebook page as "the world's largest diamond scanning facility". It's at the center of an investigation over suspected tax evasion and the undocumented sale of diamond scanning machines. According to local newspaper reports, more than a million diamonds were seized after officers forced their way into two buildings. The gems had reportedly been sent in for scanning. Large quantities of cash were also seized. The diamonds, belonging to a broad spectrum of different companies, will only be returned to their owners on the condition that they produce the proper paperwork showing ownership and documenting their legal importation and acquisition - invoices and receipts.
The Israeli diamond tech company Sarine has long been pursuing DBC through the courts over alleged infringements of its patented Galaxy technology and its copyrighted software. It claims the piracy problem is widespread in India and that many smaller players run "under the counter" scanning operations. Sarine believes there are even De Beers sight-holders who use the services of such organizations.
David Block, the company's CEO, recognizes that the legal process is slow and is only one approach to solving the problem. "Even in the best organized legal systems it can take a long time for lawsuits to be resolved, so, although we've been impressed by the efficiency of the higher courts in India, we are not relying only on the legal system to cure this disorder and are utilizing a multitude of approaches to deal with this issue, including commercial incentives", he says.
"It's only in the last four to five years that illicit operators have become openly brazen in their operations and have become more of an issue. Initially, they 'only' hacked and counterfeited copies of our software, but have since moved on to copying the hardware itself (which is protected by patents) and now openly service their customers with facilities housing hundreds of machines.
"The customers know we will come after them if they have knock-off illegal machines on their premises, and the damage to their reputation would be significant with possible ramifications to their supply and customer chains." He says it's well known - but almost impossible to prove - that some polishers send in their own people to do the work.
It would be easy to dismiss Sarine's concerns simply as self-interest, given the inevitable losses the company suffers from this software and hardware piracy. But it goes far beyond that, says Block. It stifles the development of new generations of technology, which is bad for the industry at large.
"It's a wider battle than just Sarine," he says. "Other companies, smaller than us, including even Indian ones, are having their machines and their software copied. We're spending a lot of our resources, time and money, adding security features to our software at the expense of adding beneficial functionality and taking the technology forwards.
"The matter is not only a financial one but one that goes deep to the roots of the integrity of the industry. Our industry has enough challenges with dealing with negative consumer perceptions about the diamond industry, and serious issues like this only make things worse. If the industry is prepared to turn a blind eye to blatant IP infringement, tax evasion and other illegal activities, there is little chance of changing this negative perception."
The real answer, he says, needs to come from the industry itself as a whole - from the major miners, leading manufacturers, high-end and larger retailers and the trade organizations in India and beyond. They need to focus on outlawing adverse norms. "They all need to take a stand to ensure the long-term integrity and trust that our industry needs and deserves" he says.
Have a fabulous weekend.