Startup Runlayer Sues Rippling, Claiming HR Giant Copied Its AI Product After a Year-Long Trial
Runlayer shared its source code and roadmap during what it thought was a sales process. Rippling then built its own version. Now there is a lawsuit.
Key points
- Runlayer, an AI infrastructure startup, filed suit against HR software company Rippling in 2025, alleging trade secret theft and breach of contract.
- The two companies spent nearly a year in a product trial during which Runlayer shared source code and its product roadmap under a non-disclosure agreement.
- Rippling confirmed it is launching its own MCP gateway, a tool that connects AI models to outside data and software, but denies using Runlayer's intellectual property.
- Runlayer has raised $42 million total, with backing from Khosla Ventures and Felicis.
- The case was first reported by TechCrunch.
A startup that builds AI plumbing is accusing a much larger tech company of copying its product after an extensive sales trial. Runlayer, which makes what is called an MCP gateway, filed the lawsuit in 2025. An MCP gateway is software that connects AI models and agents (software that can carry out multi-step tasks on its own) to outside data sources and business tools, in a secure and controlled way.
MCP stands for Model Context Protocol, an open standard that Anthropic, the AI safety company behind the Claude chatbot, launched in November 2024. Think of it as a universal plug socket: it lets AI tools slot into databases, calendars, HR systems and other software without each connection being built from scratch.
What does Runlayer say happened?
Rippling, which makes HR and payroll software used by thousands of businesses, approached Runlayer as a potential customer. The two sides signed a standard mutual non-disclosure agreement and a product trial contract that explicitly banned Rippling from copying Runlayer's code or building derivative works based on it.
What followed, according to the complaint, was nearly a year of intensive engineering work together. Runlayer shared its source code and product roadmap. The trial ended when the two sides could not agree on a price.
Shortly after, a Runlayer executive received a text from someone inside Rippling describing an internal project to build, in the source's own words, "essentially a clone of Runlayer... it's almost a 1 to 1 copy."
Runlayer is suing for trade secret misappropriation, unfair competition and breach of contract. It hired prominent law firm Sullivan and Cromwell to bring the case.
What does Rippling say?
Rippling is not denying the product. It confirmed to TechCrunch that it is launching its own MCP gateway. What it denies is using Runlayer's material to build it.
"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. "Rippling is launching a superior product for connecting AI tools to business data using only our proprietary information."
In short: Rippling says it built the thing itself, legally.
What does this mean for businesses selling AI tools?
This case is a warning for any small company selling software to a larger tech firm. Enterprise sales, meaning sales to big organisations rather than individual users, almost always require deep technical trials. A vendor shares sensitive details to prove the product works. That process can last months or years.
The risk is obvious in hindsight. A well-resourced customer can use the trial to learn enough to build the tool in-house, especially when the product relies on an open standard like MCP that any engineer can read.
MCP gateway products are now a crowded space. Runlayer launched in mid-2024 and raised $42 million. Competitors have multiplied since. Even with strong funding and an early start, a startup can lose a customer to a build-it-yourself decision.
The lawsuit will not resolve quickly. But whichever side wins, the case already illustrates a hard truth: sharing your best work to land a sale carries real risk when the buyer has a full engineering team.
Common questions
Does this case affect businesses that use Rippling or Runlayer?
Not directly, at least not yet. If Rippling releases its own MCP gateway, existing Rippling customers may get the feature built in. No rulings have been issued and the lawsuit is at an early stage.
What is the difference between MCP and an MCP gateway?
MCP is the free, open standard that defines how AI tools connect to outside software. An MCP gateway is a commercial product built on top of that standard, adding security controls, monitoring and management features that large businesses typically require.
