Highlight: The purchase of apps by black card is flooding the App Store, and the bank, seller and the sale platform, China’s C2C giant Taobao.com, are all involved in such transactions. Who is responsible, and what measures could developers or Apple take to resolve the issue? Bridge IP Law Commentary provides the below essay for consideration.
In China, the credit card thieves choose the Apple App Store to utilize their stolen cards through the purchasing of popular apps. They purchase the popular apps in the Store through the unauthorized use of stolen credit cards and then sell such apps by C2C websites like eBay. This type of transaction is called purchase by black card in China. Under such purchase, the Chinese clients could only pay 1 RMB for apps priced at 1 US dollar, though the official exchange rate is 6.5 RMB to 1 US dollar. First the prospective customer sends the seller the link of the app that the customer would like, then the seller purchases the app with the stolen credit card, and then sends the information for the customer to download the app and pay the seller. For all steps, it only cost several minutes. It’s simple and convenient, and so purchase by the black card is flooding in China. It’s even reported that the bad debt rate hereby produced is more than 80% for the App Store.
I. Who shall be responsible for the flood of black card purchases?
There are many parties involved in the black card purchase in China, including the bank, the black card seller, and the transaction site Taobao.com, so who shall be responsible for their use? From Bridge IP Commentary, we analyze each of the parties involved:
1. The Bank
Unlike the operation in China, most credit cards provided by banks do not require a password, and to purchase an item one only needs the card number and the identification number for the card using, which, on the other hand, could damage the safety of the credit card. In the current financial system, the bank is not held liable for insecurity that results from the use of the card number if it is stolen. The black card seller tends to take advantage of the defect in the system, which allows withdrawals on a cancelled credit card, rather than the bank’s weak security policy. Furthermore, the user agreement provided by the bank or other settlement institutions contains an exemption clause, therefore it’s least possible to demand compensation from the bank.
2. The Black Card Seller
The misconduct is obviously a kind crime of the selling of stolen goods, which shall be punished by criminal law. However, the sellers often do not reside in China and to arrest them, transnational cooperation is necessary.
3. The Buyer
Generally the buyer shall take full liability, which usually entails full fee payment on the demand of the developers, since they are aware they are making an illegal purchase by using the black card. The purchase of the good will no doubt also incur criminal charges. As indicated in the Article 312 of the Criminal Law, a person who, while clearly knowing that it is a good obtained through a crime, conceals, transfers, purchases or sells the good, shall be sentenced to fixed-term imprisonment of not more than three years of criminal detention or public surveillance. Some may also face concurrently or independently a fine of up to 4,000 RMB. And it could hardly happen in the transaction in the App Store for the low unit price.
4. Taobao.com
As a third party, neutral operation platform, Taobao does not participate in the sales, gains no profit from the transactions, and has no intention for any crime related. Therefore it’s less likely to be judged as having criminal liability. But Taobao could still be liable under civil law for its omission of preventing the misconduct, namely the liability for indirect violation of tort law.
5. The Developer
To sell the app on the market, the developer only has the sales relationship with the buyer. And they may charge the buyer when no payment has been collected by them from the buyer. For other parties, the developer has no relationship with them, and thus could not initiate any litigation against them directly, and only could report such misconduct, just like the merchants who receive counterfeit money.
II. What measures could Apple take to stop the black card?
By the aforesaid analysis, those who conduct the crime or are suspected to be so include the seller, buyers and the sales platform of the third party (mainly Taobao in China). For the victims of the developer and Apple, they shall be entitled to recover the losses from the above three parties. However, the seller and the buyer of the black card tend to be the same person, are scattered around the world, and the sales are usually low as they are done individually, thus may increasing the losses of the victim in right protection. Therefore, the developer and Apple shall find the solution from the sales platform of the third party.
From the analysis above, we know that Taobao has kind of omission on the sales of the black card. Taobao could make its own judgments on the “black card” because in the App Store, the price of the software labeled by the black card seller is usually 1/7 of the official price, which should arouse suspicion of the “black card”, yet the sales of black card are still widespread on Taobao.com.
Despite the difficulty to determine such omission as signifying criminal intention in Criminal Law, PRC, the developer, and Apple could try to demonstrate such behavior be the negative act with clearly knowledge in the civil law system. For example, to notarize the online black card sales, and send such notarized evidence accompanied with the link of the store via a lawyer’s letter to Taobao, demanding shutting down or sealing the account of the offending stores, or the developer and Apple may initiate a lawsuit if Taobao does not handle the complaint and then demand compensation from Taobao.
Author: Mr. Luo Yanjie
Attorney-at-law of DeBund Law Offices
Co-author: Mr. You Yunting
Founder & Editor-in-Chief of Bridge IPR Commentary
Partner & Attorney-at-law of Shanghai DeBund Law Offices
Email: Bridge@chinaiplawyer.com, Tel: 8621-5213-4900,
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Bridge IPR Commentary is a website focus on the introduction of commercial laws in China, especially the intellectual property laws. All the posts here are our original works. And all news or cases referred here are from public reports, and our comments or analysis are of due diligence, neutrality and impartiality, representing our own opinions only and are our original works. You may contact us shall you have any opinions or suggestions.
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