It's clear to me that advertising using someone else's trademark to promote a competing service or product is a violation of the law. However, using only those words that are generic strategically in a title (and/or copy) is not. This opens opportunities to ride on the coat tails of certain competitors effectively without violating any laws explicitly. As to the actual morality, I cannot speak. I am not God, and I am not here to judge you. All I know is -- this likely works. It works especially well on trademarks that contain lots of generic words.
For example, a query of "link worth" reveals that two competitors of LinkWorth are vying for that particular keyword. I cannot speak for intent, but it is clear to me that even if they did not intend to target that key phrase for that reason initially, they now know why it brings a substantial amount of traffic.
Let's say I were a toy store -- let's call me US Toys. Though somewhat unrealistic, if I optimized "US Toys" heavily, I may appear on the 2nd page or so for "Toys R Us." That could be extremely valuable.
You should probably think about this when you name an online business as well. The point is, this technique can bring traffic.
Whether Satan will visit you in your sleep is another story.
If you want to be nice, drop me a link for "seo book" every day for the next 20 years. Maybe in 2010 I'll outrank Aaron 
October 3rd, 2006 at 1:08 pm
Even though this is a very interesting subject, you don't really get into optimizing for trademarked words legally.
I know how effective it is to target trademarks as my PPC methods have proven to be extraordinary. So how about some of the things you do when targeting a trademark?> Tell us something we don't know.
October 3rd, 2006 at 3:42 pm
I see very limited amounts of this in the SEO-realm -- truly. Unless I'm blind, not many people are doing this.
In PPC it's rampant, though.
October 3rd, 2006 at 4:36 pm
Jaimie, I know we're limited here but one way I was able to achieve a top 10 rankings for a trademarked name is when it's a 2 word company name. Then you can split it up in your content... this works if the competitors' name is actually a normal word (describing a product).