Runlayer and Rippling Withdraw Lawsuits Without Settlement, Sparking Launch of Competing Product

On Wednesday night, Runlayer and Rippling mutually dropped their lawsuits against each other, with no settlements reached and no money exchanged, including legal fees, as confirmed by court documents reviewed by TechCrunch. Following the legal skirmish, Rippling announced the release of its MCP gateway, a product central to the disputes and a direct competitor to Runlayer’s offerings.

This dispute serves as a cautionary tale for founders navigating the AI landscape, where the rapid evolution of software development means that potential competitors can emerge from unexpected places—sometimes even from prospective customers.

Runlayer, an early-stage startup that debuted in November 2025, has secured $42 million in funding from investors, including Khosla Ventures’ Keith Rabois and Felicis. Led by third-time founder Andrew Berman, whose previous ventures include baby monitor maker Nanit and the AI video conferencing tool Vowel, which sold to Zapier in 2024, Runlayer quickly garnered attention in the tech community.

According to Runlayer’s lawsuit, after over a year of collaboration where Rippling tested Runlayer’s MCP gateway, Rippling failed to become a customer. Instead, a Rippling employee alerted Berman via text that Rippling was developing its own MCP gateway, which was described as a clone of Runlayer’s product.

Runlayer’s legal action accused Rippling of breaching contractual agreements related to the product testing. The MCP gateway serves an essential role in securely managing AI agent requests for data from various enterprise software systems, ensuring sensitive access controls and detailed monitoring of data retrieval tasks.

In response, Rippling countered with a lawsuit alleging patent violations by Runlayer, viewed by Runlayer as a strategy to escalate legal bills in an effort to intimidate them into dropping their case.

After three weeks spent in discovery, Runlayer ultimately decided to withdraw its lawsuit, with Rippling also opting to drop its countersuit without securing any settlement.

Despite the absence of substantial outcomes from the lawsuits, the situation underscores a larger lesson for startups. As the AI domain undergoes continual transformation, traditional approaches to enterprise partnerships and legal disputes may need to be reconsidered, given how quickly the needs of enterprises can shift.

In a quick pivot, Rippling, which traditionally focuses on payroll and benefits management, has entered the AI gateway market, offering a new tool capable of directing requests to various models while providing analytics on employee token spending. This product places Rippling in competition with established companies like Stripe, Ramp, and Databricks.

Additionally, Rippling is now involved in AI security, with its MCP gateway linking AI access to employee roles, setting it against competitors such as Runlayer, Docker, and Amazon Bedrock.

On the other hand, Runlayer aims to provide a comprehensive suite of agent security services associated with its gateway, spanning from agent creation to detecting unauthorized AI agents operating within an enterprise’s ecosystem unnoticed by IT.