Here are some hints I found for preventing click fraud from
Motley Fool:
1- Don't ever bid to be on the top position on any search engine PPC ad network. Skip positions 1, 2 or even 3. PPC fraudsters ususally only bother with the top positions because the top ones generate the most revenue. If you are at the 4th or 5th position, potential customers still see your ad.
2- Disable the Google's AdSense feature. You can do this in Google and stop your ads from being served on unknown 3rd party affiliates. Your ad still runs on reputable partners like AOL, AksJeeves, ets. Keep the "Search Network" and disable the "AdSense Network." You have to do this for each and every campaign on Google.
3- Do not point all your PPC ads to your home page. It makes it much harder to track potential fraud. Target your different ads to specific pages of your site with related merchandise or info. It is good PPC practice, plus it makes it easier to track sudden surges of clicks to one area of your site and you can track it back to the responsible ad campaign.
4- If you run PPC ads, make sure you sign up with someone like Orchin who trakcs your web site data and can give you detail breakdown of visitors to your site. Orchin provides me with IP addresses of visitors. Hundreds of click from the same IP address in one day is a big red flag. Of course, I know this and say it here, but have never actually had the time to use the data. But it is there and you can use it if necessary.
5- Try to optimize your site so you get free natural listings on Google and Yahoo and don't have to pay for PPC ads. Free is much better than paid, specially with all this fraud. If your PPC ad budget is $50 a day, make it $27 a day and pay the other $25 a day to an expert to optimize your site. I did it myself becasue of my need as an engineer to lear everything myself.