Whose,
First, you need to secure your server. If you're getting hacked, this isn't a PHP question, it's is a server question. If your server is secure, nobody will be able to get your code, and you won't have to come up with any contrived copy-protection scheme. As far as the code that has already been stolen, the best you can do is take legal action. That's the best you can do. Since you seem to know who the culprit is, you can always make their life very difficult, for almost no money at all. Examine your logs and find out who his ISP is. Have his ISP cancel his subscription (smaller ISPs are relatively easy to deal with in this respect). If he connects through a university (which you can figure out through your logs), tell every authority you can find there about his actions, and get him suspended or expelled. There's all sorts of stuff you can do. Jaret, as most people, seems to have the wrong idea about copyrighting. In most countries, if you produce a piece work, you automatically hold the copyright, unless you've signed an agreement to the contrary. If you write a script, even if I nobody else ever sees it, it is still be copyrighted by you, and that's admissible in court. However, this can be difficult to prove in court.
Anyhow, like I said, the first thing you need to do right now is secure your server so you don't have this problem again. The next thing to do would be to contact his ISP. If that's not enough for you, get a lawyer.