Appeals court upholds Pentagon supply-chain risk label on Anthropic
A federal appeals court in Washington, DC, ruled that Anthropic must retain a supply-chain risk designation imposed by the Pentagon, conflicting with a lower court's earlier decision. The ruling prevents the AI company from providing services to the Department of Defense while legal battles over the designation continue.
A three-judge appellate panel in Washington, DC, determined on Wednesday that Anthropic has not met requirements to temporarily remove the supply-chain risk label assigned by the Pentagon. The decision contradicts a ruling issued the previous month by a federal judge in San Francisco, creating conflicting preliminary judgments that must be resolved.
The government applied the designation under two separate supply-chain laws with comparable effects. Anthropic claims it is the first U.S. company sanctioned under both statutes, which are typically directed at foreign enterprises posing national security threats. The appellate panel stated that granting a stay would force the military to continue relations with an unwanted vendor of critical AI services during an ongoing military conflict. While acknowledging potential financial harm to Anthropic, the panel expressed concern about imposing substantial judicial constraints on military operations.
The San Francisco judge had concluded that the Department of Defense likely acted in bad faith, motivated by disagreement over Anthropic's proposed limitations on AI technology use and the company's public criticism of those restrictions. After that ruling, the Trump administration complied by restoring Pentagon access to Anthropic's AI tools. The Washington, DC, court will hear oral arguments on May 19. Anthropic maintains confidence that courts will ultimately determine the designations unlawful, while acting attorney general Todd Blanche characterized the appellate decision as a victory for military readiness.