I sell Pepsi. You sell Coke. We each own our trademarks, and work hard to enforce them. I want to sell more Pepsi, so I buy "Coke" in Google Ads - sure it will cost me money but whenever someone searches "Coke," there will be my ad on the right side of the search results - perhaps offering a special deal to new customers.
Fair? Legal? I don't know about fair, but clearly the option to bid for and pay for specific words on Google Ads is available to everyone. Only Google wins.
Is it legal? That question is not yet answered - definitely anyway. Google, not surprisingly, says yes, and offers the explanation - the legal explanation that is - that using trademark terms in metatags (another use but quite similar) and in Google Ads is not "trademark use" - that is, that the alleged infringer - me in my example - is not using the competitor's trademark in a way that identifies the source or sponsor of specific goods and thereby creates the potential for consumer confusion in the marketplace. This view has been adopted by a number of federal courts that have been presented with the issue.
In the First Circuit, however, which includes Maine, the U.S. Court of Appeals has held that it is unlawful trademark infringement for a website operator to use another's trademark on its website without permission even though the trademark is never displayed or viewed by the public. This case involved metatags but the result should have bearing on the use of another's trademark in Google Ads.