A New York-based AI startup, Runlayer, has filed a lawsuit alleging that the Silicon Valley software company Rippling stole its trade secrets to create a competing product. Rippling, which received a significant tax break from New York Governor Kathy Hochul, is accused of violating confidentiality agreements during a nearly year-long commercial partnership.
The lawsuit, filed Tuesday in the Southern District of New York, claims that Rippling engaged in secret development of an AI safety and governance product that closely mimics Runlayer's offering. Runlayer, an AI security firm backed by tech billionaire Vinod Khosla, alleges that talks to extend their partnership failed earlier this summer when Rippling refused to pay what Runlayer considered a market rate for its platform.
According to the suit, Runlayer was alerted to the alleged theft on June 12 by an insider at Rippling who texted Runlayer CEO Andrew Berman. The insider reportedly stated, "There’s been a project internally to build essentially a clone o[f] Runlayer… It’s not feature complete by any means but it’s almost a 1 to 1 copy of Runlayer." The same insider suggested that Rippling CEO Parker Conrad might be behind the project.
Runlayer is seeking damages, attorney's fees, and a preliminary injunction to prevent Rippling from using its alleged trade secrets. Rippling, based in San Francisco with New York offices, did not immediately respond to a request for comment.
Runlayer, operating as Anysource, Inc., has raised $42 million from investors including Khosla Ventures and Felicis since its founding less than a year ago. Despite its substantial backing, the New York City startup, which at the time had five employees, reportedly welcomed the partnership with the approximately $16 billion company Rippling.
Rippling was awarded $3.4 million in tax credits from Governor Hochul in December 2025 to support its expansion plans in Manhattan, including the addition of 371 new full-time jobs. During their partnership, Runlayer disclosed trade secrets, including source code and its "Gateway deployment architecture," under strict confidentiality agreements that prohibited Rippling from copying or creating derivative works.
After negotiations for their continued relationship broke down, Runlayer suspended services to Rippling on June 12. The lawsuit claims that Runlayer learned later that same day that Rippling was developing a competing AI governance platform. The suit further alleges that Rippling is preparing to launch a competing MCP Gateway, citing an unsolicited screenshot from a third party sent to Runlayer on July 1.
A Gateway functions as a security layer between AI models and their servers, enabling AI agents to access tools and data while maintaining governance. Runlayer claims that since suspending services, it has identified Rippling job postings that align with the confidential information it had shared over the past year.