Runlayer Files Lawsuit Against Rippling Over Alleged MCP Gateway IP Theft

AI infrastructure startup Runlayer has filed a lawsuit against HR software company Rippling, alleging that Rippling misappropriated trade secrets and breached contract after evaluating Runlayer’s Model Context Protocol (MCP) gateway and then building a competing product. The case, reported by TechCrunch, offers a stark reminder for Indian AI tool startups about the risks of deep enterprise trials with large tech firms that can choose to build internally.

The MCP gateway is a security and control layer that allows AI models and agents to securely access external data sources and tools. Anthropic introduced MCP as an open standard in November 2024, and it has become a key building block for AI interoperability. Runlayer, which raised $42 million from Khosla Ventures and Felicis, launched its commercial MCP gateway product shortly after.

According to the complaint, Runlayer and Rippling signed a mutual non-disclosure agreement and a product trial agreement that explicitly forbade Rippling from copying Runlayer’s intellectual property or creating derivative works. Runlayer claims the trial involved “nearly a year of intensive engineering collaboration,” during which Rippling had access to Runlayer’s product roadmap and source code.

Runlayer founder and CEO Andrew Berman decided to end the trial after the two sides could not agree on pricing. Soon after, a “Rippling insider” allegedly texted Berman to inform him of an internal project to build a product that was “almost a 1 to 1 copy of Runlayer,” according to the suit. Runlayer now alleges trade secret misappropriation, unfair competition, and breach of contract. The startup has retained law firm Sullivan & Cromwell to pursue the case.

Rippling has acknowledged it is launching its own MCP gateway but denied the allegations. A Rippling spokesperson told TechCrunch: “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.”

Legal experts note that Runlayer’s case faces hurdles, including proving that Rippling’s product derives directly from its source code and roadmap. However, the involvement of a well-known law firm adds credibility, analogously to how a marquee venture capital investor boosts a startup’s reputation.

Key facts

Party	Role
Runlayer	AI startup, developer of MCP gateway, raised $42M
Rippling	HR software company, accused of building a copy after trial
Dispute	Alleged trade secret misappropriation, breach of contract, unfair competition
Timeline	Product trial lasted nearly a year; lawsuit filed July 2026
Funding	Runlayer backed by Khosla Ventures, Felicis

Implications for Indian AI tool startups

The case resonates strongly with India’s growing ecosystem of AI infrastructure and tool startups. Many young companies rely on enterprise trials to prove their products to potential customers. However, when the customer is itself a well-resourced technology firm, there is a risk that the trial becomes a low-cost scoping exercise for internal development.

Indian startups selling AI agents, MCP gateways, or similar middleware should examine their trial agreements carefully. Standard boilerplate clauses against copying may not be enough if the customer has a large engineering team. Startups may need to implement technical controls—such as code obfuscation, time-limited access, or viewing-only modes—to limit exposure during evaluations.

The MCP gateway market heats up

The MCP protocol has attracted many players since Anthropic’s open release. Runlayer was one of the early commercial gateways, but competitors have emerged rapidly. The field now includes products from larger cloud and enterprise software vendors. This lawsuit could further accelerate the trend of enterprises choosing to build rather than buy, especially if they see legal risk in licensing third-party MCP infrastructure.

The outcome remains uncertain. Runlayer must prove specific copying, while Rippling will likely argue independent development. The case is being watched closely by AI investors and legal teams across the startup world.

What to watch next

Indian readers should follow the case’s progress through the U.S. court system. A ruling—or settlement—could set a precedent for how software trials under NDA are treated when the customer is a direct competitor. Until then, startups are advised to treat every trial as a potential competitive intelligence exercise and to lock down access accordingly.

Source: TechCrunch – “MCP startup Runlayer accuses Rippling of stealing its product idea” (https://techcrunch.com/2026/07/28/mcp-startup-runlayer-accuses-rippling-of-stealing-its-product-idea/)