The British star and his longtime collaborator Amy Wadge were cleared by a New York jury in 2023 after being accused by the heirs of Ed Townsend, who co-wrote 1973's Let's Get It On, of ripping off Townsend and Marvin Gaye's track for their own song.
However, Structured Asset Sales, the partial owners of the copyright of Townsend, later brought a new case to the US Court of Appeals for the Second Circuit, which was ultimately unsuccessful.
The appeals court ruled the two songs shared only "fundamental musical building blocks" that could not be owned by a single songwriter, Billboard reports.
The panel of appeals court judges ruled: "The four-chord progression at issue - ubiquitous in pop music - even coupled with a syncopated harmonic rhythm, is too well explored to meet the originality threshold that copyright law demands.
"Over-protecting such basic elements would threaten to stifle creativity and undermine the purpose of copyright law.
"Neither the melody nor the lyrics of Thinking Out Loud bears any resemblance to those in Let's Get It On ...
"In the field of popular songs, many, if not most, compositions bear some similarity to prior songs.
"So while a similar chord progression and harmonic rhythm may create a similar sound and feel, that is not enough."
Sheeran's lawyer Donald Zakarin told Billboard: "This ruling is consistent with the jury's rejection of any claim of infringement in the (earlier) case, finding that Ed and Amy independently created Thinking Out Loud."
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