Company suffers turnover losses of at least R90 million due to illegal actions.
The Western Cape High Court last week ruled in a precedent-setting case that pitted an employer against a former staffer.
A former employee of poultry conveying equipment manufacturer Technical Systems was caught stealing sensitive company data over time, for his personal benefit.
In his ruling, Justice Mark Sher found ex-employee Christiaan Kurtz had unlawfully accessed and stolen over a thousand copyright-protected engineering drawings over a nine-year period.
Stolen designs
These designs were used to replicate Technical Systems’ production plant, allowing Kurtz and his associates to compete directly and unfairly with the company for nearly 15 years.
The court’s judgment not only put an end to Kurz’s activities, but also set a precedent that could shape future cases of theft of incorporeal property – in other words the intangibles that belong to a company.
The case spanned 71 days and included 17 000 pages of submissions and 11 infringements of copyright, the incorporeal property held by Technical Systems, a key player in the global market for poultry feed-conveying products.
The company supplies between 40% and 50% of the world’s demand, which consumes 98% of its production.
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Technical Systems founder and director Theuns Kühn said in a statement the company has already incurred over R40 million in legal fees since starting action in 2014 and suffered turnover losses of at least R90 million due to Kurz’s unlawful actions.
Additionally, the company was forced to lower its prices to stay competitive, leading to an estimated R180 million loss in profit before tax from 2009 to the present.
Kühn said the losses were a direct loss of foreign proceeds, given the company’s reliance on exports.
“The defendants sold our three-dimensional parts assembled into substantially similar production machinery to four competitors of ours in three continents, one in the US, one in Thailand and two machines in China,” he said.
The production lines consequently produced unlawful products and those losses are not fully quantified yet.
Court orders destruction of records
The court ordered the cessation of all manufacturing by Kurtz, along with the destruction of all related records from their computers and electronic devices.
The judgment also included a significant financial penalty, with the defendants being ordered to pay damages and cover Technical Systems’ legal costs. This could amount to well over R180 million.
Kühn described the ruling as a major relief after years of tension and uncertainty. “Justice is served. After so many years of tension and uncertainty among us, my family and staff can now sit back and relax again,” he said.
The court’s decision was not just about halting the defendants’ unlawful activities; it also paved the way for the future criminal prosecution of Kurtz and his associates.
Kühn confirmed that a docket has been prepared for the National Prosecuting Authority (NPA) to pursue criminal charges against Kurtz.
“It is imperative that the prosecution take its course,” he said.
The docket currently addresses copyright infringement, but Kühn said the defendants’ actions could also potentially violate broader laws related to the interception of communications.
The Cybercrimes Act of 2021 also makes provision for theft of incorporeal property.
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Kühn said the defendants in this case formed a criminal syndicate, hacked company e-mails for nine years, stole more than 1 000 copyright protected engineering drawings, removed confidential information, replicated a production plant with Technical Systems’ intellectual property and competed unlawfully for a decade and a half.
This systematic theft not only hurt Technical Systems financially, but also threatened the livelihoods of many within its supply chain, Kühn said.
“South Africa lost foreign proceeds of millions of dollars and there are certainly job losses in our supply chain that starts with steel suppliers, including Technical Systems and right up to Portnet staff as a consequence,” he added.
Sher condemned Kurz’s actions. He noted that Technical Systems had invested considerable time, effort and money over more than 20 years to develop its feed chain production line.
“Given the turnover generated by the plaintiff and the position it has achieved in the global market utilising these processes, they have obvious and significant economic value to it,” Sher said.
Despite the victory, Kühn expressed concerns about the effectiveness of South Africa’s criminal justice system in handling white-collar crime.
Stronger, more competent enforcement of laws related to incorporeal and intellectual property theft could have prevented much of the damage suffered by Technical Systems, he said.
“The state’s crime prevention institutions must be properly funded and, more importantly, staffed with competent specialists that understand these laws and that can prosecute successfully.”