The best way to stop or at least limit the effects of click fraud is to use the IP Exclusion Tool from the Campaign Settings area in you Google Adwords Campaign settings. Please keep in mind that you should enable the "All Settings" type for your campaigns to view the Advanced Settings section and to be able to do all the necessary modifications.
Using this tool, you will be able to block certain IP addresses or even IP address ranges - by editing the IP Exclusion Fields for each of your campaigns (unfortunately you will need to add the adddresses for each of your campaigns).
You wil have to add the IP that you want to block in the IPv4 format and also IPv6 format and each address should occupy only one line in the form provided by Google.
Also, you will be able to block certain IP ranges if you want to exclude certain internet providers or companies.
What other things can you do from AdWords to limit click fraud?
Visual Guide to Adwords IP exclusion:
1. Well, there are at least 2 things that you are able to do within the AdWords campaign to limit click fraud. One of them is to observe where are your clicks coming from and to setup your campigns to target only specific regions (for example: do not target the whole world)
2. In case you are using Remarketing campaigns, please keep in mind that there is an option named frequency capping, which means that you will be able to stop showing ads to a certain visitor that already clicked on your ads a couple of times.
1. First step would be to access the Settings tab of your campaign, and then click on "All settings":
2. Second step would be to:
3. Thirs step would be to actually add the IP addresses that you want to exclude from your Adwords campaign: