Appeals court upholds Pentagon’s Anthropic supply-chain risk designation

A federal appeals court on Friday upheld the Pentagon’s designation of artificial intelligence company Anthropic as a supply-chain risk, allowing the department to continue removing Anthropic’s Claude models from its systems and barring defense contractors from using them for Pentagon work.

The U.S. Court of Appeals for the District of Columbia Circuit ruled 2-1 that the Defense Department had sufficient grounds under the Federal Acquisition Supply Chain Security Act to conclude that Claude’s continued integration into its systems posed a covered national-security risk. Judge Gregory Katsas wrote the majority opinion, joined by Judge Neomi Rao; Judge Karen LeCraft Henderson dissented.

The dispute arose after negotiations over military uses of Claude broke down. Anthropic restricts its models from certain applications, including fully autonomous weapons and mass surveillance of Americans. The majority said the statutory definition of supply-chain risk turns on the company’s conduct rather than its motives, and found that the defense secretary acted within his statutory and constitutional authority.

The decision concerns one of two legal designations used by the government. A federal judge in San Francisco ruled in August that a parallel designation under a different law was unlawful.

Anthropic said it disagreed with Friday’s ruling and was considering further review. The appeals panel delayed the ruling’s immediate effect to allow the company to seek rehearing before the panel or the full D.C. Circuit. Anthropic could also petition the Supreme Court.