Runlayer sues Rippling over alleged MCP gateway theft following failed partnership talks

Runlayer, a startup providing secure gateways for the Model Context Protocol standard, has sued HR software company Rippling, alleging that it misappropriated the firm's intellectual property to build a competing product.

The Trial and the Breakdown#

The two companies engaged in what Runlayer describes as "nearly a year of intensive engineering collaboration" as Rippling evaluated the startup's technology. During this period, Runlayer shared extensive materials including its product roadmap and source code. Both parties signed a mutual non-disclosure agreement, and Rippling also agreed to a product trial contract that explicitly prohibited copying Runlayer's IP or creating derivative works—standard language in enterprise software evaluations.

When negotiations eventually stalled over pricing, the trial ended. Within weeks, Runlayer alleges that an insider at Rippling tipped off the startup's founder Andrew Berman about an internal effort to "build essentially a clone" of Runlayer's offering, describing the planned product as "a 1 to 1 copy."

The Allegations and Response#

Runlayer's lawsuit asserts trade secret misappropriation, unfair competition, and breach of contract. Rippling has acknowledged that it is building its own MCP gateway but flatly denies the intellectual property claims. "Runlayer's panicked effort to avoid competition by fabricating claims is not an effective way to deal with its business failures," a Rippling spokesperson said, adding that the company is "launching a superior product for connecting AI tools to business data using only our proprietary information."

Runlayer retained litigation powerhouse Sullivan & Cromwell, a move that lends the case profile even if the outcome remains uncertain.

The Broader Tensions in Enterprise AI Sales#

The dispute illustrates a growing challenge for AI infrastructure vendors: deep technical trials required to win enterprise deals expose startups to the very risk they're trying to mitigate. Enterprise customers—especially well-resourced tech companies with strong engineering teams—often have the capability to build solutions in-house after evaluating third-party alternatives. This creates a fundamental tension where the sales process itself may undermine a startup's competitive moat.

Runlayer raised $42 million total, including backing from Khosla Ventures and Felicis, after launching its product in late 2024. The MCP gateway category has become increasingly crowded since in November 2024, intensifying competition for market share.