Runlayer, a startup offering a secure Model Context Protocol (MCP) gateway, has filed a lawsuit against HR software company Rippling, alleging trade secret misappropriation and breach of contract after a nearly year-long product trial. The complaint, seen by Bitcoin World, centers on claims that Rippling used Runlayer’s proprietary information—including source code and product roadmap—to build a competing product.
What the lawsuit alleges
According to the complaint, Runlayer and Rippling entered into a mutual non-disclosure agreement and a product trial agreement that explicitly prohibited Rippling from copying Runlayer’s intellectual property or creating derivative works. Over approximately 12 months, Runlayer provided Rippling with extensive access to its technology, including its source code and future product plans. Runlayer says the trial involved “nearly a year of intensive engineering collaboration.”
After the two companies failed to agree on pricing, Runlayer terminated the trial. Shortly afterward, Runlayer founder and CEO Andrew Berman received a text from a person described in the suit as a “Rippling insider,” claiming the company had initiated an internal project to build what the message called “essentially a clone o[f] Runlayer … it’s almost a 1 to 1 copy of Runlayer.”
Runlayer’s lawsuit includes claims of trade secret misappropriation, unfair competition, and breach of contract. The startup has retained Sullivan & Cromwell, a prominent law firm often associated with high-stakes corporate litigation.
Rippling’s response
Rippling has confirmed to Bitcoin World that it is launching its own MCP gateway product. A company spokesperson denied Runlayer’s allegations, stating: “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.”
The spokesperson did not provide details on when Rippling’s MCP gateway would launch or how it differs from Runlayer’s offering.
Broader implications for AI infrastructure sales
This case highlights a growing risk for startups selling complex AI infrastructure to enterprise customers, particularly other technology companies. Enterprise sales cycles for AI tools often require deep, hands-on trials that expose proprietary technology to potential customers. Those customers may have the engineering resources to build similar products in-house, creating a tension between the need to demonstrate value and the risk of IP theft.
MCP gateways are becoming a crowded market. Anthropic launched MCP as an open-source protocol in November 2024, establishing a standard for AI models and agents to securely access external data and tools. Runlayer launched its commercial product in mid-2024 and has raised $42 million from investors including Khosla Ventures and Felicis. Other competitors are entering the space, making differentiation and customer trust critical.
What this means for startups and enterprises
For startups, the Runlayer-Rippling dispute underscores the importance of robust legal protections during product trials, including clear contractual language and careful control over access to source code. For enterprises, the case serves as a cautionary tale about the reputational and legal risks of building products based on information obtained during vendor evaluations, even if the enterprise believes its work is independent.
Legal experts note that Runlayer’s retention of Sullivan & Cromwell does not guarantee victory, but it signals the startup’s willingness to pursue the case aggressively. The outcome could set a precedent for how intellectual property disputes are handled in the rapidly evolving AI infrastructure market.
Conclusion
The Runlayer v. Rippling lawsuit offers a rare inside look at the challenges of selling AI infrastructure to enterprise customers, where the line between collaboration and competition can blur. As the MCP gateway market grows more competitive, this case may influence how startups protect their IP and how enterprises conduct product evaluations. The court’s eventual decision will be closely watched by both the AI and venture capital communities.
FAQs
Q1: What is an MCP gateway?
An MCP (Model Context Protocol) gateway is a security and management layer that allows AI models and agents to safely access external data sources and tools. It builds on Anthropic’s open-source MCP standard, launched in November 2024, to enable controlled interoperability.
Q2: What does Runlayer allege Rippling did?
Runlayer claims that during a year-long product trial, Rippling gained access to its source code and product roadmap under a non-disclosure agreement, then used that information to build a competing MCP gateway product. Runlayer alleges trade secret misappropriation, breach of contract, and unfair competition.
Q3: How has Rippling responded to the lawsuit?
Rippling has confirmed it is launching its own MCP gateway but denies using Runlayer’s IP. A spokesperson called the lawsuit a “panicked effort to avoid competition” and stated that Rippling’s product is built using only its own proprietary information.
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