Lessons Learned: The Runlayer Lawsuit Saga and the Importance of Caution for Entrepreneurs

Runlayer and Rippling Drop Lawsuits Against Each Other

In a surprising turn of events, Runlayer and Rippling have decided to drop their respective lawsuits against each other without reaching a settlement or exchanging any money, including lawyers’ fees, as per court documents obtained by TechCrunch.

Following this development, Rippling wasted no time and promptly released its MCP gateway, the focal point of the legal disputes and a direct competitor to Runlayer’s offering.

This highly publicized dispute serves as a cautionary tale for founders in the AI era. With the ease of developing new software, potential competitors can emerge unexpectedly, including from within the customer base.

To recap the brief legal clash, Runlayer, a startup that emerged from stealth mode in November 2025, has secured $42 million in funding from prominent VCs such as Khosla Ventures’ Keith Rabois and Felicis. The company, led by seasoned entrepreneur Andrew Berman, previously founded successful ventures like Nanit and Vowel.

The legal dispute arose when Rippling, after extensively testing Runlayer’s MCP gateway for over a year, decided not to become a customer. Instead, Rippling informed Berman of its intention to develop its own MCP gateway, described by an employee as a replica of Runlayer’s product.

Runlayer then filed a lawsuit alleging that Rippling breached contractual obligations related to product testing.

An MCP gateway plays a crucial role in managing an enterprise’s AI agent requests for data from various software systems securely. It ensures that data retrieval processes are controlled and can incorporate additional features such as role-based access control and observability.

In response, Rippling countersued, accusing Runlayer of infringing on its patents in what was perceived as a tactic to pressure Runlayer to withdraw its lawsuit and incur legal expenses.

Following three weeks of discovery, Runlayer chose to dismiss its lawsuit, prompting Rippling to do the same without seeking a settlement.

Although the legal battles did not yield any tangible outcomes, the situation underscores the rapidly evolving landscape of AI technology, necessitating a reevaluation of prolonged technical confrontations between startups and enterprises.

Rippling Expands into AI Gateway Market

In a strategic move, Rippling, traditionally focused on payroll and benefits management, has ventured into the AI gateway sector with a versatile tool capable of routing to different models and monitoring token expenditure per employee. This new product competes with established players like Stripe, Ramp, and Databricks.

Furthermore, Rippling has entered the AI security realm with its MCP gateway, aligning AI access with employee roles. This places Rippling in competition with Runlayer, Docker, and Amazon Bedrock.

Contrastingly, Runlayer emphasizes a comprehensive suite of agent security services linked to the gateway, spanning from agent creation to detecting unauthorized AI agents operating within an enterprise.

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