In case you haven't heard yet, Google finally released its long-awaited Link Disavow tool. You can get more details about it here.
In a blog post about the tool, Google includes a Q&A section. One of the questions in that is: Can this tool be used if I'm worried about "negative SEO"? Here is Google's official response to that:
The primary purpose of this tool is to help clean up if you've hired a bad SEO or made mistakes in your own link-building. If you know of bad link-building done on your behalf (e.g., paid posts or paid links that pass PageRank), we recommend that you contact the sites that link to you and try to get links taken off the public web first. You’re also helping to protect your site’s image, since people will no longer find spammy links and jump to conclusions about your website or business. If, despite your best efforts, you're unable to get a few backlinks taken down, that's a good time to use the Disavow Links tool.
In general, Google works hard to prevent other webmasters from being able to harm your ranking. However, if you're worried that some backlinks might be affecting your site's reputation, you can use the Disavow Links tool to indicate to Google that those links should be ignored. Again, we build our algorithms with an eye to preventing negative SEO, so the vast majority of webmasters don't need to worry about negative SEO at all.
Negative SEO also came up during the PubCon session in which Google's Matt Cutts revealed the tool. Barry Schwartz at Search Engine Roundtable has a liveblog from that. Here is his account of what Cutts had to say about the subject:
All the negative SEO complaints he sees, or most of it, is really not negative SEO hurting you. It is a much better use of your time to make your site better vs hurting someone else. At the same time, we've seen cases of this as an issue. I.e. buying a new domain and needing to clean up that site. There are people who want to go through this process. Plus SEOs that take on new clients that went through bad SEOs.
Remember, Google updated the language of a help center article addressing negative SEO, seemingly indicating that it is possible.