Would you expect this to be OK or not?
My way of thinking is that if TM cannot be used, then it CANNOT, regardless of where the ad is showing.
It sounds like it IS working
No, it's not working. My ads were historically around 2nd or 3rd position in this case. Going forward, the status of each related keyword is explained as that they don't trigger ads due to AdWords' policies, including TM. It clearly says that ad is not showing because of that.
Finally, I already talked to the rep, and she confirmed that I would need authorization if I want my ads to show up.
At the same time, since it's software related business, there are sites that sell pirated versions of such, and not just that they are running on AdWords, but they even use the TM just like they own it.
Also, there are other regular advertisers that are using it as well.
Go figure...