According to Reuters, a Manhattan judge has thrown out a lawsuit filed by music publisher Bourne Company in relation to the track, which appeared in the season three episode When You Wish Upon A Weinstein.
Bourne had claimed that the Family Guy version, named 'I Need A Jew', was in violation of their copyright, and that its "vile and outrageous anti-Semitic message" had caused "substantial and ireparable harm" to the company.
In essence, Bourne is arguing that parody should be illegal and the judge rightly pointed out that, as a matter of law, it is not. Case closed. Perhaps more surprisingly, the judge went on to demonstrate that she has a fair understanding of how parody works:
She added that copyright ownership did not provide protection from parody and noted that the song had enjoyed a "beneficial association" with "wholesome" films such as Disney's Pinocchio.
"It is precisely that beneficial association that opens the song up for ridicule by parodists seeking to take the wind out of such lofty, magical, or pure associations," she said.
Good on ya, yer Honor.
As a bonus, here's another article which provides a link to "The Freaking FCC", which is mandatory, NSFW viewing. This one's not about copyright; it's just a poke at the morals police.