Lawsuit Alleges IP Theft After Product Trial
Runlayer, a startup that offers a secure gateway for the Model Context Protocol (MCP), has filed a lawsuit against HR software company Rippling, according to a complaint reviewed by TechCrunch. MCP is an open standard that allows AI models and agents to securely access external data and tools.
The lawsuit serves as a cautionary tale for any company selling AI infrastructure to enterprise customers, particularly other tech firms that have the engineering resources to build similar products internally.
Details of the Trial and Allegations
In the lawsuit, Runlayer describes an extensive product trial conducted by Rippling as a potential customer. During this trial, Runlayer shared its product roadmap and even its source code. The two companies had signed a mutual non-disclosure agreement, and Rippling also signed a product trial agreement that included a standard clause prohibiting copying of Runlayer's intellectual property or creating derivative works.
Runlayer states in the complaint that Rippling's evaluation involved "nearly a year of intensive engineering collaboration." However, the two parties could not agree on pricing, and Runlayer ended the trial.
Shortly after the trial ended, Runlayer alleges that a "Rippling insider" texted Runlayer founder and CEO Andrew Berman to inform him of "a project internally to build essentially a clone of Runlayer … it's almost a 1 to 1 copy of Runlayer."
Runlayer claims in the suit that Rippling's product must have been based on the startup's intellectual property, constituting trade secret misappropriation, unfair competition, and breach of contract.
Rippling's Response
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Rippling has confirmed to TechCrunch that it is launching its own MCP gateway. However, a spokesperson denied Runlayer's allegations of misusing its intellectual property.
"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," a Rippling spokesperson told TechCrunch.
Legal and Industry Implications
Runlayer has retained the law firm Sullivan & Cromwell. While this does not guarantee a win in court, having a prestigious law firm lends the lawsuit some credibility, similar to how a top venture capital firm lends credibility to a startup.
The more interesting aspect of this lawsuit is the inside look it provides into the challenges of selling complex AI infrastructure to enterprises, especially other tech companies. Enterprise sales often take a long time to close because they rely on deep, hands-on trials.
The Growing MCP Gateway Market
The MCP gateway market is becoming increasingly crowded. Anthropic launched MCP as an open-source protocol in November 2024. It has since become a fundamental building block for AI interoperability, allowing models and agents to securely access external data sources and services. MCP gateway products add control, security, and other features, particularly for managing agents. The field has become much more competitive since Runlayer launched its product in mid-2024 and raised a total of $42 million from investors including Khosla Ventures and Felicis.
Even after an intensive trial, an enterprise may choose to build the tool internally. Both sides face a difficult situation.