oracle is right on this one
What Google is doing is subverting and fragmenting the platform. They work outside of JCP, they implement something that is neither a subset nor a superset of any standart Java platform - it has stuff that is not part of SE and misses mandatory bits of ME - replacing them with custom functonality. Google did not write their VM from scratch - they borrowed from Apache Harmony project (which does strive to build a fully compliant implementation of Java) and threw out enough bits to make it incompatible with any other Java VM and not subject to JCP, i.e. controlled by Google only.
Why Google did not use Java ME (or SE - the hardware is good enough)? They did want android to look open and attract developers, but they did not want it to be really open because that might have scared network operators. So, when faced with choice - go fully open (and use opensource JCE-compliant VM) or go fully closed (and license a JCE-compliant VM like other phone makers do) they choose to cut a new path. We'll see where it leads.
One thing is certain, though. Oracle is no SCO, they have much much more money, and if Google does not come back into the fold of JCP soon more lawers will become very very rich.