The case brought by Structured Asset Sales LLC was dismissed by US District Judge Louis Stanton in federal court in Manhatten on Tuesday.
Judge Stanton ruled that the parts of Gaye’s 1973 soul track Let’s Get It On that Sheeran was accused of infringing were too common for copyright protection.
It comes just weeks after Sheeran won a separate jury trial over the two songs in the same court. That case was brought by the family of Ed Townsend, who co-wrote Let’s Get It On with Gaye.
But Townsend’s family failed to convince jurors that Sheeran infringed their part of Townsend’s copyright in the song.
Structured Asset Sales is owned by investment banker and ‘Bowie Bonds’ creator David Pullman, and it owns part of Townsend’s interest in Let’s Get It On.
It sued Sheeran, his label Warner Music Group and his music publisher Sony Music Publishing in 2018 after Townsend’s family filed their lawsuit.
The company had alleged “the combination of the chord progression and the harmonic rhythm used in Thinking Out Loud is substantially similar to that in Let’s Get It On, and thus infringes the work”.
But Judge Stanton on Tuesday found that the combination of chord progression and harmonic rhythm in Gaye’s song was a “basic musical building block” that was too common to merit copyright protection.
Sheeran’s attorney Ilene Farkas called the decision “an important victory not only for Ed” and collaborator Amy Wadge, “but for all songwriters and consumers of music”.
Sheeran faces another pending lawsuit from SAS, related to the finished recorded version of Let’s Get It On, which Pullman hopes will reach a jury trial.
Following his jury trial win earlier this month, Sheeran told reporters outside court: “I’m obviously very happy with the outcome of this case and it looks like I’m not going to have to retire from my day job after all.
“But at the same time I am absolutely frustrated that baseless claims like this are allowed to go to court at all.”
He added: “If the jury had decided this matter the other way we might as well say goodbye to the creative freedom of songwriters.
“We need to be able to write our original music and engage in independent creativity without worrying at every step on the way that said creativity will be wrongly called into question.”
The British singer songwriter has scored a sixth consecutive number one album with his latest release, Subtract, as it becomes the UK’s fasting selling record of 2023 so far.
The album was born of a year of challenges, including the death of Sheeran’s friend music entrepreneur Jamal Edwards, discovering while his wife Cherry Seaborn was pregnant that she needed an operation on a tumour, and confessing to an eating disorder.
Speaking of the album, Sheeran said: “This album means the absolute world to me, and I think it’s going to be a very, very important album for me for a very, very long time.”