Runlayer Sues Rippling Over Alleged Theft of AI Infrastructure Trade Secrets

The Conflict Over Proprietary AI Tools

Runlayer, a startup specializing in secure Model Context Protocol gateways, has initiated legal proceedings against HR software firm Rippling. The lawsuit, documented in a report by TechCrunch, details accusations of trade secret misappropriation, breach of contract, and unfair competition. At the heart of the dispute is an intensive, year-long collaboration that soured when the parties failed to reach a pricing agreement. Runlayer alleges that during this trial period, it granted Rippling access to its internal product roadmaps and sensitive source code under the protection of a non-disclosure agreement.

According to the court filing, the relationship between the two companies involved significant engineering oversight. Runlayer contends that the partnership was standard procedure for enterprise software testing, governed by a trial agreement that strictly prohibited the creation of derivative works or the cloning of intellectual property. Once the pricing negotiations collapsed and the trial ended, the situation took a sudden turn. Runlayer founder Andrew Berman reportedly received a message from an internal source at Rippling. This individual claimed the company was actively developing a product that functioned as a near-exact replica of Runlayer’s own gateway technology.

Rippling Denies Misconduct

Rippling has publicly acknowledged its entry into the MCP gateway space, confirming it is currently building its own solution. However, a company spokesperson categorically rejected the allegations brought forward by Runlayer. The representative dismissed the lawsuit as a desperate attempt by a failing business to stifle legitimate market competition. Rippling maintains that its upcoming product relies solely on proprietary information developed in-house, rather than any misappropriated code or intellectual property from its former partner. The company asserted its confidence in winning in the marketplace, stating it is focused on delivering a superior tool for integrating business data with AI agents.

To manage its legal defense and prosecution, Runlayer has secured the services of the high-profile law firm Sullivan & Cromwell. In the competitive landscape of venture-backed startups, the selection of such counsel serves as a powerful signal of intent. While the stature of the firm does not guarantee a courtroom victory, it elevates the optics of the suit, positioning Runlayer as a serious entity capable of litigating against a much larger organization. The case will likely turn on the specific technical overlap between the two products and the degree to which Rippling's internal development process relied on the data shared during their prior partnership.

The High Stakes of Enterprise AI Sales

The dispute highlights the friction inherent in selling complex AI infrastructure to large, tech-forward companies. For smaller vendors, these enterprise trials represent a double-edged sword. They offer a path to scale and validation, but they also expose highly sensitive, foundational intellectual property to potential customers who possess the engineering resources to replicate that work themselves. The Model Context Protocol market, which emerged as a critical standard for agent interoperability following the release of open-source tools by Anthropic in 2024, has become increasingly crowded. Managing these gateways requires sophisticated control and security features, areas where startups like Runlayer have invested heavily.

Runlayer successfully secured $42 million in funding, counting Khosla Ventures and Felicis among its backers. This capital was intended to fuel its growth as a foundational building block in the AI stack. However, the current litigation underscores the vulnerability of such infrastructure providers when dealing with larger entities that prioritize internal control. The tension between building a proprietary, third-party solution and the desire of enterprise clients to bring those capabilities in-house is a defining challenge for this generation of software firms. As these companies negotiate the boundaries of intellectual property, the industry will be watching to see how courts interpret the duties owed during pre-sales trials and collaborative technical evaluations.