Now Rippling is counter suing tiny startup Runlayer

HR startup Rippling filed a lawsuit Monday accusing MCP gateway startup Runlayer of infringing on three of its patents, according to the lawsuit seen by TechCrunch.

The filing comes after Runlayer sued the HR startup last month, accusing it of breach of contract and stealing its product ideas.

It’s the latest saga between the two companies after Rippling spent nearly a year testing the startup’s MCP product. The two companies never agreed on a price, and the trial never turned into a paid contract. Instead, Rippling built its own MCP server, and will soon offer it as a product that competes with Runlayer. (Rippling often turns its internally used tech into products, like its recently released AI Spend Console.)

Their battle serves as a warning of how the relationship between customers and startups can devolve in this AI-powered age of fast product building.

Runlayer, which launched its product about a year ago, bundles an MCP gateway with cybersecurity features like threat detection. MCP is an open standard that allows AI agents to connect with data and software systems needed to work independently.

Runlayer has raised a total of $42 million and was founded by third-time founder Andrew Berman. (His previous companies were baby-monitor maker Nanit and an AI video conferencing tool, Vowel, that sold to Zapier in 2024). Rippling became one of Runlayer’s earliest potential customers trialing its software.

The most dramatic detail in the lawsuit is Runlayer’s claim that a Rippling employee reached out to Berman to warn him that his employer was building a “copy” of Runlayer’s product. A Rippling spokesperson tells TechCrunch that its employee has since revised that view.

On Rippling’s side, perhaps the most dramatic claim is that it informed Runlayer of the patents it believed Runlayer had infringed soon after the startup filed its lawsuit.

One might infer that the suit is intended as leverage to bring Runlayer to the settlement table. Indeed, that’s how Runlayer views it.

“This is a desperate, retaliatory ploy to distract from the fact Rippling misappropriated our proprietary technology. We clearly have a standout AI product that has nothing to do with these patents. No attempt to bully or distract will prevent us from protecting our IP and continuing to innovate and create the best product for our fast-growing customer base,” Berman said in a written statement.

Rippling loves a good fighting-words statement too. Its spokesperson told TechCrunch: “It takes a certain boldness to accuse a competitor of violating intellectual property laws while infringing on that competitor’s inventions. But that’s exactly what Runlayer has done here. Rippling’s lawsuit calls out Runlayer’s hypocrisy. Having manufactured claims against Rippling to distract from its business failures, it now has to face a lawsuit for repeatedly copying Rippling’s inventions in building its own products.”

Now it’s up to the courts to unwind who did what to whom, unless the parties settle. But these dueling cases still serve as a buyer- and seller-beware warning. With AI advances, enterprises have never before been more empowered to build tech in-house. Yet they still may put a startup through its paces before choosing that option.