Another emulation lawsuit, Sony v Connectix, happened the previous year. In that case the concepts of emulation were found to be legal but Connectix was hit for copyright infringement of the Playstation's BIOS.

Bleem used HLE to avoid needing a copyrighted BIOS image. Sony complained to the courts, but Bleem successfully defended all counts using the Connectix precedent.

You're looking at the appeal - in appeal, the only leg Sony had left to stand on was the use of screenshots of copyrighted games, but the court determined it to be fair use.

So the precedent comes from looking at a series of cases around this time, but Sony v Bleem is commonly used as a handwaving reference to the whole saga. It's the first major time this defense was successfully used in court.

For an interesting comparison, the GPLv2 was written in 1991 but technically wasn't tested in a US court until 2014.

(IANAL.)