The Bleem v. Sony case is often brought up whenever legal action against emulators happens, and I got curious, so I dug a bit deeper. It's quite hard, as most of the actual source material is not publicly available for free, only the appeal decision by the ninth court. But from what I've gathered from secondary sources, this is what actually happened.

1. Sony sues Bleem on one count of unfair competition and one count of copyright violation for the use of Sony game screenshots in Bleem advertising.
2. A judge dismisses the unfair competition claim. Sony wins the copyright violation.
3. Bleem appeals, and the Ninth Court reverses the decision on copyright violation for advertisement material.
4. Sony sues again, this time for unfair competition and also patent infringement for using their BIOS.
5. Sony and Bleem settle for an undisclosed amount. Bleem declares bankruptcy.

As far as I can tell, the only precedent was on whether or not you can use a competitor's screenshots in your advertisement, and indeed that's all I've ever seen the case referred to in future cases. The first unfair competition claim was dismissed (so cannot be a precedent) and the second case was settled. I see a lot of people say that this case set a "precedent" that "emulation is legal", but I don't see how?

Is this just another case where through a game of telephone and rumors people just take it for assumed fact that somehow or another this case "set a precedent that emulation is legal"? For over 20 years?

On whether or not emulation is legal, generally things are legal unless they are made to be illegal; there is certainly no specific law that says that emulation is legal. The question, then, is whether or not emulation is inadvertently made illegal by an existing law.

In that respect, Bleem v. Sony is a useful indicator in that Sony's lawyers couldn't really find anything concrete to nail Bleem on. But not really more than that, unless you really care about whether or not an emulator can use screenshots in their advertisements.