Java is licensed under the GPL, yes? In which case Google would also have to release their code under the GPL, no? (They may have done this, I'm not familiar with the situation.)
Code being open source doesn't mean you can do what you want with it, it still has to be allowed by the license.
Google's code is free for anyone to grab and hack, which is why there are so many different versions of Android floating about. They have abided by the license. Google was slapped with a tiny fine for code-lifting, but it only amounted to about $150k. The problem Oracle has is that it's very difficult to claim monetary damage when you're giving something away for free.