I'm in a similar quandary.

I'm developing a little web-based application aimed at language
learners which takes in a string that the user has typed in,
translates it to another language (selected by the user) using Google
Translate, searches Twitter messages containing the translated text,
returns appropriate "tweets" from Twitter, and finally provides a
translation for each tweet. I have made clear throughout the site that
the translations are powered by Google Translation (displaying a
trademark, i.e. Google TranslateTM and branding), and even stated that
the site is in no way affiliated to Google. Yet, having read the TOS,
I'm concerned the translations are seen as "primary content" (even
though they are displayed alongside Twitter messages).

I think both our apps fall into the proverbial grey area.

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