I think it was declared legal time and time again? I'm familiar with at least a couple image-related lawsuits where they came out on top.

The bigger issue is that website owners have become increasingly hostile to crawling, and that's effectively closed the door behind Google, because that's when it starts getting more legally contentious. Which is why I think they should be forced to open up their crawl to everyone, so that we can have meaningful competition in the indexing/search space.