Runlayer sues Rippling for trade secret theft after insider warns of 'almost 1 to 1 copy'

AI Startup Takes Legal Action After Year-Long Product Trial

Runlayer sues Rippling in a lawsuit filed Tuesday in Manhattan federal court, accusing the $16.8 billion HR technology firm of trade secret theft, unfair competition, and breach of contract 1

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. The AI security startup, backed by tech billionaire Vinod Khosla and venture capital firm Felicis with $42 million in funding, alleges that Rippling stole its product idea after nearly a year of intensive engineering collaboration during a product trial 3

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The New York-based company, which operates under the legal name Anysource, Inc., provides a secure Model Context Protocol gateway that monitors and controls how AI agents access enterprise software systems 4

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. The MCP gateway sits between AI models and their servers, allowing agents to pull in external data and tools while maintaining a secure governance layer.

Extensive Access Under Confidentiality Agreements

According to the complaint, Rippling entered into a product trial agreement with Runlayer that included a mutual non-disclosure agreement and clauses forbidding the HR software company from copying Runlayer's intellectual property or creating derivative works—standard boilerplate in enterprise software trials 1

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. During the evaluation period, Runlayer disclosed extensive trade secrets including its source code, product roadmap, and Gateway deployment architecture under strict confidentiality agreements 4

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The lawsuit against Rippling describes how the AI startup, which employed just five workers at the time, jumped at the opportunity to partner with the Silicon Valley giant 4

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. Negotiations ultimately broke down when the parties could not agree on pricing, with Runlayer alleging that Rippling refused to pay a market rate for its platform 4

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. Runlayer suspended services to Rippling on June 12.

Insider Warning Triggers Legal Battle

The same day Runlayer ended the trial, CEO Andrew Berman received a text message from a Rippling insider warning him about internal developments. "There's been a project internally to build essentially a clone o[f] Runlayer," the message read, describing it as "almost a 1 to 1 copy" 1

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. The insider also suggested Rippling CEO Parker Conrad was potentially behind the duplicate product, writing "it smells like a Parker thing" 3

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By July 1, Runlayer obtained a screenshot from a third party showing what it alleges is a clone of Runlayer's product—a competing MCP Gateway that Rippling is preparing to launch 3

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. The startup also identified Rippling job postings that align with confidential information it had disclosed during the trial period 4

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Rippling Denies the Allegations

Rippling has confirmed it is launching its own MCP gateway but Rippling denies the allegations about misusing Runlayer's intellectual property. "Runlayer's panicked effort to avoid competition by fabricating claims is not an effective way to deal with its business failures," a Rippling spokesperson told TechCrunch 1

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. The company claims it is building "a superior product for connecting AI tools to business data using only our proprietary information" and has "every reason to win in this market" 1

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Runlayer is seeking a preliminary injunction to block Rippling from misusing its trade secrets or selling a competing product, along with unspecified monetary damages, attorney's fees, and a jury trial 2

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. The company has retained Sullivan & Cromwell, a white-shoe law firm that lends the lawsuit credibility 1

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. "Runlayer invests heavily in its innovations and proprietary technologies and will vigorously defend its intellectual property," CEO Andrew Berman said in a statement 2

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Broader Implications for AI Infrastructure Sales

The case serves as a cautionary tale for anyone selling AI infrastructure to enterprise customers, particularly to other tech companies that have the engineering muscle to build competing tools themselves 1

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. Enterprise sales cycles notoriously take a long time to close, often because they depend on deep, hands-on trials where buyers gain extensive access to a product's inner workings 1

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The MCP gateway market has grown increasingly competitive since Anthropic launched the Model Context Protocol as an open-source standard in November 2024 1

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. MCP gateways add control, security and other features for managing AI agents, making them essential building blocks of AI interoperability. The field has become considerably more crowded since Runlayer launched its product in mid-2025 1

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Adding another layer of irony to the situation, Rippling itself was recently the victim in a separate corporate espionage case. The company is embroiled in a legal dispute with HR software rival Deel over accusations that Deel used a former Rippling employee as a spy to steal its trade secrets 2

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. The employee confessed in an Irish court last year to spying for Deel, though Deel has denied the allegations and countersued Rippling for alleged racketeering and unfair competition 2

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. Now Rippling finds itself on the other side of similar accusations 3

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