"Google would likely have liability if they discovered this and didn't report."

I agree. However, they have to look for it to discover it. The provider is safe in ignorance by default. Google has chosen to pursue this activity like an investigative agency and is using a system that seeks out specific material in an automated fashion.

But i agree that now the ignorance is gone they must report it.

Further i think subject nature of the content is distracting to the conversation. The problem IMO is not that google reported content. Its that google is looking for it.