Does Google know the difference between duplicate content and quoted content?

Does Google know the difference between duplicate content and quoted content?

We know that the Google duplicate content penalty (Panda) only applies for content that is being used on the same site but at a different location. Not when it's used on one site copied from another. In that case you just wont rank as high for it as the original. But sometimes in a discussion, you want to quote what someone has said so that you can form a reply around it so they know what you're talking about or points you're referring to.

And sometimes, such as in forums more, some people quote whole replies or even the original post and just say "Thanks" or something. And this can happen many times. So that thread/url ends up with tons of duplicated content that's repeated over and over again.

So the question is, does Google know that this is quoted content due to the use of the html blockquote element?

Does the blockquote element work the same the iframe element that links to the original source of content work in a similar way? So that Google knows where that content is from and isn't attributing it as duplicated content?

If you look at the source code of a quoted post from the forum here for example. It uses attribution type class and links to the original source of that content. Much like how the canonical URL works.

And the official HTML5 blockquote links directly to the source with a citation

Should all quoted text use a citation link or is that the same as as the blockquote element? Should all copied text that's duplicated on the same page be quoted using blockquote element or equivalent or would that be seen as duplicate content?

What do you think?

Thanks!