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[riidick]

Is this a trademark fraud?  One US dealer registered the trademark brand of the manufacturer in China without any consent then emailed all other dealers including me here in the US a cease and desist letter to stop selling their product even though the manufacturer did not authorize them do so. 

What are our options here?   Can we sue them for fraud and loss of income?

[BobRoberts]

First, I would seek competent Trademark Counsel...

If I understand correctly, Chinese manufacturer manufactures goods and sells them in the US using 'Brand X' mark.  It sounds like various businesses (including the federal trademark applicant/registrant) purchase these goods from the chinese manufacturer for resale.  One of the purchasers, BadGuy, decided to file for and received Federal Trademark Protection for 'Brand X' for those goods.  Then  BadGuy demands all others sease and desist from using 'Brand X' in conjunction with those goods/services.

(Very) Basically, trademark rights are formed through use in commerce.  The first to use a mark in connection with goods/services has superior rights against others that come after. 

When filing for a US Federal Trademark Application, the applicant must sign a declaration stating that BadGuy
"believes the applicant to be the owner of the mark and that no one else, to the best of his or her knowledge and belief, has the right to use the mark in commerce, either in the identical form or in such near resemblance as to be likely, when applied to the goods or services of the other person, to cause confusion or mistake, or to deceive.  The undersigned being warned that willful false statements and the like are punishable by fine or imprisonment, or both, under 18 U.S.C. 1001, and that such willful false statements and the like may jeopardize the validity of the application or document or any registration resulting therefrom, declares that all statements made of his/her own knowledge are true; and all statements made on information and belief are believed to be true.

If my understanding of the above fact-pattern is correct, then it would seem that BadGuy's filing for federal registration of 'Brand x' for similar goods and services committed fraud before the US Patent and Trademark Office.  Fraud is not easily found, but can result in cancellation of an application.  Seek competent counsel with your specific fact pattern to see if you have a course of action (and to find out the costs in pursuing that course).

Good luck.