NYC AI Startup Runlayer Sues Rippling Over Alleged Trade Secret Theft and Copycat Product

A tiny New York-based AI security startup is taking on a $16 billion Silicon Valley software giant in federal court, alleging that Rippling used a commercial partnership as cover to steal proprietary technology and build a near-identical competing product. Runlayer — formally Anysource, Inc. — filed suit Tuesday in the Southern District of New York, claiming Rippling violated strict confidentiality agreements it signed during a nearly year-long partnership to develop AI safety and governance tools.

Runlayer, which has raised $42 million from backers including Vinod Khosla's Khosla Ventures and Felicis, says the betrayal came into focus on June 12 when a Rippling insider texted CEO Andrew Berman directly with a warning. That insider described an internal project that was 'almost a 1 to 1 copy of Runlayer' and suggested Rippling CEO Parker Conrad may have been behind it — characterizing it as something that 'smells like a Parker thing.' Runlayer suspended services to Rippling the same day, and by July 1 had received an unsolicited screenshot from a third party suggesting Rippling was preparing to launch a competing MCP Gateway product.

At the heart of the dispute is that MCP Gateway technology — a layer that sits between AI models and their servers, enabling AI agents to access tools and data while maintaining security and governance controls. Runlayer alleges it disclosed extensive confidential information to Rippling during the partnership, including source code and its proprietary 'Gateway deployment architecture,' all under agreements explicitly barring Rippling from copying or creating derivative works. Runlayer says it only agreed to partner with Rippling — which employs far more than Runlayer's five workers at the time — because of the scale and market access it offered.

Rippling flatly denied the allegations, calling Runlayer's lawsuit a panicked attempt to avoid competition following business failures, and insisting its forthcoming product relies solely on proprietary information. The company argued it has every reason to compete and win in this market independently. Runlayer is seeking damages, attorney's fees, and a preliminary injunction to block Rippling from developing or selling any product built on its trade secrets. The case adds another layer of controversy around Rippling, which received $3.4 million in New York State tax credits from Governor Kathy Hochul in December 2025 tied to a Manhattan expansion and 371 new full-time jobs.