On Wednesday night, Runlayer and Rippling dropped their respective lawsuits against each other, ending a short-lived but highly public legal fight. No settlement was reached, no money changed hands, and neither side collected lawyers’ fees, according to court documents seen by TechCrunch. Rippling celebrated by immediately releasing its MCP gateway — the product at the heart of the dispute and the one that competes directly with Runlayer’s offering.
The episode is a cautionary tale for founders handling the AI space: in an era when building software has become almost trivial, you never know who your next competitor will be. It might even be a prospective customer.
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The dispute, briefly
Runlayer is an early-stage startup that launched out of stealth in November 2025, having raised $42 million from investors including Khosla Ventures’ Keith Rabois and Felicis. It is led by third-time founder Andrew Berman, whose previous companies include baby-monitor maker Nanit and Vowel, an AI video conferencing tool that sold to Zapier in 2024.
According to Runlayer’s lawsuit, Rippling tested Runlayer’s MCP gateway for more than a year, with the two engineering teams working closely together. But Rippling never signed on as a customer. Instead, Berman received a text from a Rippling employee saying his employer was building its own MCP gateway and planned to release it as a product — one the employee described as a clone of Runlayer’s. Runlayer sued, claiming Rippling violated contractual agreements covering the tests of its products.
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Rippling countersued, alleging that Runlayer was violating some of its patents. Runlayer saw the move as an attempt to induce it to drop its suit while ratcheting up legal expenses. After spending the last three weeks in discovery, Runlayer dropped its suit. Rippling then dropped its own suit, with no settlement collected.
What an MCP gateway does
An MCP gateway securely handles an enterprise’s AI agent requests for data from other software systems. For example, when a hiring professional asks for details on the top five candidates for a job, including their emails, that data must be retrieved from the company’s recruitment system. The gateway handles the retrieval process, rather than granting agents direct access to the company’s software systems.
It can also layer on additional features like employee role-based access control — managers getting different access than interns — and observability, including logs and usage trails. This makes the gateway a critical piece of enterprise AI security infrastructure.
What this means for founders
The AI arena is changing so rapidly that the long-running technical shoot-outs that enterprises love to impose on startups need to be rethought. Between the time an AI startup enters into one and however many months later, an enterprise’s needs and desires may have drastically changed.
In the span of weeks, Rippling — whose bread and butter has historically been payroll and benefits management — has now entered the AI gateway market with a tool that can route to different models while dashboarding token spend by employee. The product competes with the likes of Stripe, Ramp, and Databricks. Rippling is also now in the AI security business with its MCP gateway that ties AI access to employee roles, competing with Runlayer, Docker, and Amazon Bedrock.
As for Runlayer, its pitch is a broader bundle of agent security services tied to the gateway, ranging from agent creation to spotting shadow AI agents running in an enterprise unbeknownst to IT.
The takeaway for founders is clear: in the AI age, the competitive environment can shift overnight. A company that was once a potential customer can become a direct rival, and the tools you build can be replicated faster than ever. Legal battles may offer little recourse, but they do offer a lesson: build defensibility into your product, and be prepared for the unexpected.
