Startup Corgi denies stealing code amid vibe coding controversy

Earlier this week, Papermark, a maker of open-source data room software—which refers to secure document sharing software used by startups for due diligence—accused Corgi of “stealing its software” and passing it off as its own. Corgi, an insurance tech startup backed by startup accelerator and investor Y Combinator, denies the allegations. Nico Laqua, co-founder and CEO of Corgi, pushed back against the claims, stating that no code from Papermark was used. However, Laqua admitted that the company relied on ‘vibe coding’—a method of development where AI is used to replicate the design and features of existing products—for certain visual elements. He acknowledged that Corgi should have relied on its own visual and language choices rather than taking cues from existing products in the market.

The controversy began when Papermark co-founder Marc Seitz shared screenshots showing Corgi’s new product using identical language and features. Seitz characterized Corgi’s product as “copyright- and license-infringing” and “fraud.” While Corgi maintains that the underlying code is entirely different, the incident highlights the legal and moral ambiguities of AI-assisted development. Laqua suggested the accusations were driven by competition, noting that Corgi is offering a mostly free product that competes directly with Papermark’s SaaS. Dan Barrett, founder of the agent operating system OpenProse, questioned the adequacy of current legal frameworks, asking, “In a world where a bot can trivially copy 1:1 the structure of something even if the character-level code diverges … what makes one unacceptable and the other not? existing IP law, incidental to the old world? is there not some greater principle at work here?”

In response to the allegations, Corgi has applied legal pressure, issuing a cease-and-desist letter—a legal letter demanding the recipient stop a specific activity—to Seitz. This response aligns with Corgi’s growing reputation for being “litigious.” The startup has previously sued several former employees. Additionally, in May, competitor Matcha accused Corgi of “bullying behavior” during a separate dispute.

The legal disputes come amid a sequence of capital raises for Corgi, which has secured funding at increasing valuations over a short period:

• A $106 million Series B1 funding round, which valued the company at $2.6 billion.
• A $160 million Series B funding round, announced just three weeks prior, at a $1.3 billion valuation.
• A $108 million Series A funding round, completed four months earlier.

Why it matters

The controversy raises questions about the limits of intellectual property law when ‘vibe coding’ allows for the replication of a product’s look, feel, and function without copying the underlying code.