Every startup that sells into the enterprise eventually faces the same uncomfortable question: what happens if the customer evaluating your product decides it would rather build the thing itself? On July 28, 2026, that question turned into a lawsuit. Runlayer, a startup building infrastructure for the Model Context Protocol, sued HR and payroll platform Rippling in the Southern District of New York, alleging that a nearly year long product trial ended with Rippling using Runlayer's own technology to build a rival product.
A Sales Process That Turned Into a Lawsuit
On paper, this started out as an ordinary enterprise sales cycle. Rippling, which manages HR, payroll, and IT systems for more than 20,000 companies and has been aggressively expanding its AI capabilities, approached Runlayer as a prospective customer interested in its MCP gateway product. What followed, according to Runlayer's complaint, was anything but a routine evaluation.
What Runlayer Actually Builds
Runlayer, founded by CEO Andrew Berman, launched its product in the latter half of 2025 and has since raised a total of $42 million, including backing from Khosla Ventures and Felicis. The company builds what's known as an MCP gateway, software that sits between AI models or agents and a company's internal systems, adding a layer of control, security, and oversight to how those agents access sensitive business data.
Why MCP Gateways Have Become Such a Hot Category
The Model Context Protocol, or MCP, is an open standard that Anthropic introduced in November 2024 to give AI models and agents a consistent, secure way to pull in outside data and tools. It has since become one of the foundational building blocks of AI interoperability, and as more enterprises deploy autonomous agents, the market for gateway products that sit on top of MCP and add governance, security, and access control has grown increasingly crowded and increasingly valuable.
The Allegations at the Center of the Case
In its complaint, Runlayer alleges trade secret misappropriation, unfair competition, and breach of contract, and is asking the court for both damages and a preliminary injunction. The claims center on what Runlayer says happened during and immediately after an extended product trial with Rippling.
A Nearly Year Long Trial With Full Access
According to the suit, Rippling's evaluation of Runlayer's product stretched on for close to a year and involved what Runlayer describes as intensive engineering collaboration. During that period, Runlayer says it shared its product roadmap and its actual source code with Rippling's teams. Before any of that access was granted, the two companies signed a mutual non disclosure agreement, and Rippling separately signed a product trial agreement containing a clause barring it from copying Runlayer's intellectual property or creating derivative works, language Runlayer's complaint describes as standard boilerplate in enterprise software trials.
Negotiations Collapse Over Price
Despite the extensive technical collaboration, the two companies were unable to agree on pricing. Runlayer ended the trial around June 2026, closing off Rippling's access to its product and technical materials.
A Text Message That Triggered the Lawsuit
Not long after the trial ended, Runlayer alleges that someone inside Rippling reached out directly to CEO Andrew Berman with a warning about what the company was building internally.
"It's almost a 1 to 1 copy of Runlayer," the insider allegedly told Berman, describing an internal project to clone the startup's product.
Runlayer argues that a product resembling its own this closely, built so soon after a trial that included full access to its source code, could not plausibly have been developed independently, and that the resemblance points directly to misuse of its trade secrets.
Rippling's Response
Rippling has confirmed that it is indeed launching its own MCP gateway product, but it firmly denies that any of Runlayer's intellectual property was involved in building it. A company spokesperson dismissed the lawsuit as an attempt by Runlayer to avoid competition by manufacturing claims rather than confronting its own business problems, and maintained that Rippling's new product was built entirely using its own proprietary work, giving it every confidence it can win in the market on its own merits.
Runlayer Digs In
Runlayer has retained Sullivan & Cromwell, a well known corporate law firm, to represent it in the case, a choice that signals how seriously the startup intends to pursue the matter. In a statement, Berman said Runlayer invests heavily in its own innovation and proprietary technology and will vigorously defend its intellectual property, describing the company's platform as resting on two equally important pillars: helping enterprises adopt AI agents while keeping that adoption safely under control.
Why This Case Resonates Beyond These Two Companies
The dispute has drawn attention well past the specifics of Runlayer and Rippling because it captures a risk that a lot of AI infrastructure startups quietly worry about: what happens when the prospective customer evaluating your product is itself a well resourced tech company with the engineering talent to build a competing version in house.
| Party | Position |
|---|---|
| Runlayer | Alleges Rippling used trial access to source code and roadmaps to build a near identical clone in breach of contract |
| Rippling | Confirms it is building its own MCP gateway, denies using Runlayer's IP, calls the suit a reaction to competitive pressure |
| Wider industry | Watching closely as a test case for how enterprise product trials should be structured and protected |
Part of a Broader Pattern of Trade Secret Disputes
This isn't happening in isolation. Rippling has been involved in other high profile litigation in recent memory, including a closely watched corporate espionage dispute with rival HR platform Deel. And the broader AI industry has seen a wave of trade secret and IP related fights this year, including Apple's own trade secret lawsuit against OpenAI. Enterprise AI infrastructure, it seems, has become valuable enough that disputes over who actually built what are becoming a regular feature of the landscape rather than a rare exception.
The Legal Hurdles Ahead
Trade secret misappropriation cases are notoriously difficult to win outright. Runlayer will need to show not just that Rippling's product looks similar to its own, but that the similarity stems specifically from misuse of confidential material shared during the trial, rather than from independent engineering built around the same underlying MCP standard that any company is free to build on. Retaining a marquee law firm like Sullivan & Cromwell lends the case a degree of credibility, but it doesn't guarantee an outcome. Rippling's defense, that it built a superior product using only its own resources, is a common and often successful argument in these kinds of disputes, especially when the underlying protocol itself is open and available to any engineering team.
What Startups Can Take Away From This
Regardless of how the case is ultimately resolved, it offers a useful set of lessons for any startup selling deeply technical products into enterprise customers, particularly other technology companies.
- Long trials carry real exposure. The longer and deeper a technical evaluation goes, the more of your actual intellectual property a prospective customer sees.
- Contracts matter, but so does documentation. An anti copying clause only helps if you can clearly show what was shared, when, and how a competing product resembles it.
- Enterprise customers can become competitors. A well resourced prospective buyer may always have the option to build in house instead of paying for your product.
- Speed after a deal collapses is a signal worth watching. A competing internal product appearing shortly after a failed negotiation is the kind of timeline that invites scrutiny.
- Reputation matters in litigation too. The choice of law firm and the public framing of a dispute can shape how it's perceived long before a judge rules on the merits.
What Happens From Here
The case is now in the hands of the Southern District of New York, where Runlayer is seeking both damages and a preliminary injunction that could affect how quickly Rippling is able to bring its own MCP gateway to market. Given Rippling's confirmed plans to launch a competing product regardless of the outcome, the coming months will likely bring further filings, and possibly settlement discussions, as both sides weigh the cost of a prolonged legal fight against the value of the market they're fighting over.
Final Thoughts
Strip away the legal language, and this case is really about a question that's becoming more common as AI infrastructure becomes more valuable: when a well funded customer gets an inside look at how your product works, what actually stops them from building it themselves. Runlayer is betting that its contracts, its documentation, and an alleged insider tip give it a strong enough case to hold Rippling accountable. Rippling is betting that its own engineering, and the open nature of the underlying MCP standard, will be enough to show it built something of its own. Either way, the outcome will be watched closely by every startup currently locked in a long, high stakes enterprise trial of its own.
Related Topics: #Runlayer #Rippling #StartupLawsuit #MCP #TradeSecrets #AIInfrastructure #EnterpriseSoftware #StartupCompetition