Feathers ruffled in R180m copyright infringement case

In a landmark judgment, global poultry feed chain manufacturer, Technical Systems (TS) has been awarded an over R180 million copyright infringement claim against upstart Feed Chain Industries, which was proved to have stolen intellectual property to manufacture and sell the feed chain.

The feed chain is a conveyor belt that transports chicken feed in a trough.

In what Western High Court Judge Mark Sher described as an “egregious and brazen infringement”, Feed Chain founder Christiaan Kurtz, who was employed by TS as a plant engineer from 2001 to 2009 was found to have transferred more than 34 000 electronic files containing drawings, confidential production processes and machinery from his work supplied Mercer computer to his personal HP and/or Dell laptops and to other hard drives.

Through Feed Chain, subsidiaries CQuiptech, CGC Industries along with partners Carl Richter and Gary Colenbrander, Kurtz replicated similar parts of the feed equipment, and went into unfair competition with TS, diverted customers, undercut prices in 15 years of unlawful competition.

The court instructed the seizure of all electronic or digital media, including computers, tablets, smartphones, hard drives, servers, removable drives, flash drives, CD drives, and DVD drives as well as all social media accounts.

To establish the quantity of the damages, the court also ordered the seizure of all financial statements, quotations, invoices, purchase orders, delivery notes, records of raw materials, attendance at trade fairs, customs clearance forms, foreign exchange contracts, bank statements, and remuneration or salaries.

The records are to be destroyed under the supervision of attorneys, technical experts, photographers, and independent IT experts, among others.

TS, established in 1993 by Theuns Kühn is by volume the largest manufacturer of poultry feeding equipment, more specifically chain and auger conveyors, leading competitors including McAuley Inc (US), VDL Agrotech (Holland), SKA (Italy), CASP (Brazil) and a company in Beijing, that supply the entire world market for feed chain. VDL and CASP are also customers.

TS supplies about 50% of the world market and exports about 98% of the feed chain it produces: 40% goes to Europe, 5% to the US, 15% to South America (mainly Brazil), 15% to the Middle East, and about 20% to China.

The judgment comes on the back of a 2014 litigation won by TS in relation to the production of another component of the machinery called an auger, in which Feed Chain was interdicted but ignored the court order, and continued with its production processes.

In 2020 an order was made for the separation of issues, consequently it was heard on the merits of the claim, ie liability issues with the quantum issues standing over for later determination.

“They cynically set about establishing a feed chain production plant, which replicated that of the plaintiff, utilising the plaintiff’s confidential information and trade secrets and breaching its copyright. Thus, from about 2015 to 2016 onwards, the defendants have been competing unlawfully with the plaintiff in the production of the feed chain. Their conduct was brazen and egregious,” the court said.

According to the court judgment, the damages are still in the process of being quantified, but Kühn said more than R40m was incurred in legal fees since 2014, with losses in turnover of at least R90m as it was forced to lower its prices because of the unlawful competition, resulting in a bottom-line loss of roughly R120m.

Kühn estimates the loss in profit before tax to be R180m for the period 2009 to date, including costs.

Evidence emerged that the group had pitched sales of some of the intellectual property to established TS customers Rexnord, Agromarau and CASP, as well as trying to solicit an Iranian company Arsamkar which was offered high-quality drawings for it to set up its own plant for the production of chain or to supply it with a complete, ready-made feed chain production line, for $234m but the deal went south when the customer offered only $19m.

Similar proposals were also prepared by the syndicate for Plasson, a French manufacturer and supplier of livestock equipment.

Judge Sher also ordered TS to pay damages and legal costs as Kühn confirmed there was a docket waiting for the criminal prosecution of Kurtz at the National Prosecuting Authority (NPA), based on the judgment of this trial.

BUSINESS REPORT