My competitor threatens lawsuit over adwords

[PaulSymonds]

My understanding is that what you are doing is actually legal and permitted by in Google Adwords.

Google changed their rules about 4 months ago to allow anyone to bid and include competitor names etc and to make it a free for all. I am assuming they have not rescinded that rule since.

I think your competitor is wasting his time. I would ignore him.
If you are really worried then why not just remove their name from your adwords.

[ogletreeseo]

Find out what city he lives in and target everywhere else but that city.