That bastard cracked your $1 app. ONE DOLLAR. That's all you asked in exchange for the hours you put in, and the guy still didn't pay. People like that should be executed. Like in the middle ages - an arm for an arm, an eye for an eye. Chill. He wasn't your customer anyway.
Without diving too deep into a discussion on the usefulness of copyright, there are lessons we can learn from the fashion industry. It always had next to no intellectual property protection and a gigantic knock-off market (ever seen street stands with “genuine” Louis Vuitton bags?) Looking at how much sales the fashion industry is making, compared to high IP ones, they seem to be doing just fine:
Still, fashion designers must be feeling awful watching people buying all this counterfeit apparel, enjoying the results of their work without payment, and will pursue every opportunity to curb that market, right? Not quite. Addressing the issue, Gucci's legend Tom Ford said:
And we found after much research that – actually not much research, quite simple research – that the counterfeit customer was not our customer. [emphasis mine]
I picked up the quote from Johanna Blakley's talk at TEDxUSC “Lesson's from fashion's free culture", where she argues for less intellectual property protection overall, which would not only spark innovation by making new ideas easily accessible, but also profit the very creators who's interests copyright claims to protect.
You see, the guy who cracked your app wouldn't have bought it otherwise. Maybe he doesn't have the money, maybe he's not sure if it's worth even $1, or it's just his philosophy - not paying for software. But the app now has one more user, who still might become a customer eventually, or lead others to become by bragging about the great app he just found.
Think beyond the app, where you already sunk the cost of development. What can you offer that is scarce, that would make paying more attractive? How about a service available only to official customers? Support? A booklet with workflow tips?
Focus on your customers - those who do pay, because they value how your work saved them some of theirs. Build relationships with them, see that the app continues to adapt to meet their needs, and don't waste emotions on those who never were your customers in the first place.
*[IP]: Intellectual Property