Those that have been following the various legal wranglings over search ads and trademarks recognize that a key issue is whether search ads classify as a 'use in commerce'. This distinction is important for trademark holders - very few trademark protections apply unless the trademark is 'used in commerce'. I'm surprised that there has ever been any doubt about this issue, but it hasn't necessarily been clear in the past.
TechCrunch points to a recent ruling in the Rescuecom v. Google case that has been bouncing around the courts for a few years. The court ruled that search ads can represent a 'use in commerce' and sent the case back to court for another trial.
The next big legal question is whether competitive search ads on trademarked terms can cause 'consumer confusion'. A legal consensus hasn't formed yet on whether consumer confusion can exist or not. I've been surprised by how little research has been done on this issue and would expect to begin to see some research introduced in the various cases currently in the legal system.