Sean Carey and Beau Golden are the Australian songwriters who filed the lawsuit, claiming the Sheeran co-written tune "blatantly copied" their 2014 song When I Found You, that was performed by Jasmine Rae, according to the Hollywood Reporter.
"The copying is, in many instances, verbatim, note-for-note copying of original elements of the song, and is obvious to the ordinary observer", the complaint reads.
Sony Music Entertainment and the song's other co-writers were also named as defendants.
The similarities between the two works were brought to the attention of Rae by way of a fan tweet, according to the suit.
It's also been alleged that employees of Sony Music knew about the similarities between the two songs months before "The Rest Of Our Life" was released.
"Mr. Holland admitted to knowing about the Infringing Song months in advance of its release because he was tasked with promoting and marketing the Infringing Song and Infringing Sound Recording before its release", states the complaint.More news: TCS stock slips 1% after Q3 numbers
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Among a long list of defendants in the case are Sheeran, McGraw and Hill themselves, plus McDaid and Wadge, Sony Music, Sony/ATV and Universal Music Publishing.
Ed Sheeran has been accused of plagiarising a hit song originally recorded by Australian country music star Jasmine Rae.
"Indeed, it strains credibility to believe that it is just a coincidence that the Infringing Song/Infringing Sound Recording, a blatant note-for-note copy of the song, was created without Mr. Holland's providing access, when Mr. Holland is the boyfriend of one of the writers of the song".
"He works directly with the Tim and Faith label team in Nashville", Rae wrote in an email to Carey and Golden, according to the lawsuit.
The complaint says that based on downloads, Spotify and YouTube streams, TV broadcasts and live performances, Sheeran and his co-writers have profited in excess of $US5 million from The Rest of Our Life. We had a night out in NY, got back to his hotel to drink more, and he played "Atlantic City".
The legal action is being led by lawyer Richard Busch, who has become something of a trailblazer in this area, since successfully convincing a jury that Robin Thicke's "Blurred Lines" was a total rip-off of Marvin Gaye's "Got To Give It Up" in 2015.