Runlayer Sues Rippling Over Allegations of Intellectual Property Theft

New Delhi, India Jul 29, 2026 ALN: Runlayer, a startup that offers a secure Model Context Protocol gateway — a standard for letting AI models and agents securely pull in outside data and tools — has filed a lawsuit against HR software startup Rippling, according to the complaint seen by.

The lawsuit serves as a cautionary tale for anyone selling AI infrastructure to enterprise customers, especially to tech companies that increasingly possess the engineering capabilities to develop similar products independently. This situation underscores the complexities and risks inherent in the rapidly evolving landscape of artificial intelligence technologies and their commercialization.

In the suit, Runlayer describes an extensive product trial conducted by Rippling as a prospective customer, during which the MCP startup shared everything from its product roadmap to its actual source code. The parties signed a mutual non-disclosure agreement and Rippling signed a product trial agreement that included a clause forbidding it from copying Runlayer’s intellectual property or creating derivative works, which is standard in enterprise software trials. Such agreements are crucial in protecting proprietary technologies, especially in an industry where innovation is rapid and competitive advantage can hinge on the uniqueness of a product.

Runlayer claims that Rippling’s evaluation involved “nearly a year of intensive engineering collaboration.” However, the two companies could not agree on a price, leading Runlayer to terminate the product trial. This highlights a common challenge in the tech sector where negotiations can become protracted, particularly when the value of cutting-edge technology is difficult to quantify. The inability to reach a consensus on pricing can lead to strained relationships and, as seen in this case, potential legal disputes.

Shortly after, Runlayer alleges that a “Rippling insider” informed Runlayer founder and CEO Andrew Berman about an internal project to build a product that closely resembles Runlayer’s offering, describing it as “almost a 1 to 1 copy of Runlayer.” This allegation raises serious questions about the ethical boundaries of competition in technology development. The line between inspiration and infringement can often be blurred, particularly in sectors where ideas and technologies evolve rapidly.

The lawsuit asserts that Rippling’s product must have been based on Runlayer’s intellectual property, constituting trade secret misappropriation, unfair competition, and breach of contract. These claims, if proven, could have significant implications not only for Rippling but also for the broader tech industry. Misappropriation of trade secrets can lead to hefty penalties and can damage a company's reputation and market position. Furthermore, such legal battles can deter innovation, as companies may become more cautious in sharing their technologies during trials.

Rippling has confirmed its intention to launch its own MCP gateway but denies the allegations of misusing Runlayer’s intellectual property. A spokesperson stated, “Runlayer’s panicked effort to avoid competition by fabricating claims is not an effective way to deal with its business failures. Rippling is launching a superior product for connecting AI tools to business data using only our proprietary information — we have every reason to win in this market.” This defense strategy reflects a common approach in corporate disputes where companies seek to frame their actions as legitimate competitive practices rather than unethical behavior.

Runlayer has engaged the prestigious law firm Sullivan & Cromwell for its case. While this does not guarantee a favorable outcome, having a well-known law firm can lend credibility to the lawsuit. The involvement of a reputable legal team signifies the seriousness with which Runlayer is approaching the case and underscores the potential stakes involved. Legal proceedings in intellectual property cases can be lengthy and costly, often extending for years before a resolution is reached.

The lawsuit highlights the challenges of selling complex AI infrastructure to enterprise clients, particularly tech companies. Enterprise sales are notoriously lengthy, often requiring deep, hands-on trials. This can lead to significant investments of time and resources for both the vendor and the client, creating an environment ripe for disputes when expectations are not met or when competition arises unexpectedly.

MCP gateways are becoming increasingly competitive. Anthropic launched MCP as an open-source protocol in November 2024, establishing it as a fundamental component of AI interoperability. MCP gateway products enhance control, security, and other features, especially for managing agents. The competition has intensified since Runlayer introduced its product last year, raising a total of $42 million from investors including Khosla Ventures and Felicis. This influx of capital reflects the growing interest and investment in AI technologies, as businesses seek to leverage AI capabilities to improve efficiency and drive innovation.

Even after an extensive trial, enterprises may decide to develop the tool in-house, leaving both parties in a challenging position. The trend of companies opting to build their own solutions rather than purchasing them from startups can be detrimental to smaller firms, which rely on the sale of their technologies for survival. This dynamic creates a precarious situation for startups, who must balance the need to demonstrate their products' value while safeguarding their intellectual property during the evaluation process.

The implications of this lawsuit extend beyond the immediate parties involved. As AI technologies continue to evolve, the legal frameworks governing intellectual property rights will likely be scrutinized and tested. Companies in the tech sector may need to reevaluate their strategies for protecting their innovations and consider the potential risks of engaging in collaborative product trials with larger firms. The outcome of this case could set important precedents for how intellectual property disputes are handled in the tech industry, influencing how companies approach partnerships and product development in the future.

In conclusion, the legal battle between Runlayer and Rippling serves as a reminder of the complexities and challenges that come with innovation in the technology sector. As AI continues to transform industries and create new opportunities, the need for robust legal protections and clear ethical guidelines will become increasingly important. This case will not only impact the companies involved but could also shape the future landscape of AI and technology development, as businesses navigate the fine line between competition and collaboration.