This liability may exist if you knowingly allow someone else to violate another party?s trademark rights and personally gain from such violation. It may also exist if you intentionally encourage another person to violate a trademark.
It is not clear to me that bidding on a trademark keyword is a violation of a trademark. It is in France, can you point to US precedents on this?
It also says:
However in another case a court felt that a company providing domain name registration, had less control over the use of its service and was not liable for contributory trademark infringement when someone registered a domain name that infringed a trademark.
SO it is consistent with this that Google are not responsible for the violation of the trademark on the site itself. Selling a keyword based ad is not very different from selling a domain name containing a keyword.
Imagine the record companies having to sue every individual file sharer to stop Napster or Grokster
They do and can go after individuals.
Google cannot always know who owns a trademark, or what is a violation.
Are you seriously contending that Google should decide who it thinks owns every trademark, and restrict bidding on that basis? How can they know who is an authorised re-seller and who is not? How can they know who is selling a pirated copy, and who is selling a legitimate rival product? I am not in favour of search engines doing the job of the courts.
It is is such an excessive burden for TM holders to sue people, why is not an excessive burden for Google to take on?