Anthropic fights Pentagon blacklisting

Anthropic asked a federal appeals court on Tuesday to throw out the Pentagon’s designation of the company as a “supply chain risk,” a label that bars defense contractors from using Claude on Department of Defense work. The dispute stems from Defense Secretary Pete Hegseth’s March 3 decision to classify Anthropic as a national-security risk after the company refused to remove two contractual restrictions on using Claude for lethal autonomous warfare and mass surveillance of Americans. (cnbc.com) Judges on the U.S. Court of Appeals for the D.C. Circuit spent nearly two hours questioning both sides and appeared split over how far the court can go in reviewing the Pentagon’s action. The hearing put a narrow procurement statute at the center of a broader fight over whether an AI company’s product restrictions can trigger a governmentwide exclusion from defense work. Anthropic says the Pentagon used a tool historically aimed at foreign adversaries to punish an American company for safety limits. The government says it acted to protect military operations during an active conflict. ### Why did the Pentagon blacklist Anthropic in the first place? Pete Hegseth designated Anthropic a supply-chain risk on March 3 after the company declined to let Claude be used for autonomous weapons and domestic mass surveillance, according to court coverage of the case. (cnbc.com) That designation required contractors working with the Pentagon to certify they were not using Anthropic’s models on Defense Department contracts. Sharon Swingle, the Justice Department lawyer arguing for the Pentagon, told the court the department needed to move quickly and warn agencies to replace Anthropic’s models. “It put people on notice that they needed to be moving as quickly as possible to get substitute AI models to be integrated into the system,” she said, according to CNBC’s account of the hearing. (cnbc.com) ### What did Anthropic tell the judges? Kelly Dunbar, Anthropic’s lawyer, told the panel the Defense Department already has procurement tools to decide which products meet military requirements without “jumping to the highly public blacklisting of an American company as a national security threat.” Dunbar argued that if the Pentagon cannot confirm a product will operate the way it wants in conflict, it can simply choose not to buy it. (politico.com) Anthropic has also argued in court filings and prior proceedings that the label has already cost the company business and damaged its reputation beyond defense work. (cnbc.com) A D.C. Circuit panel said in an April 8 ruling that Anthropic would “likely suffer some irreparable harm,” but left the designation in place while the merits case moved forward. ### Which judges seemed most skeptical of the Pentagon? Judge Karen Henderson questioned whether the Pentagon had shown any factual basis for calling Anthropic a supply-chain risk. “I don’t see that the department has in any way supported its determination that there is a supply chain risk with Anthropic, much less a significant supply chain risk,” Henderson said during Tuesday’s argument. (cnbc.com) She also described the department’s move as a “spectacular overreach,” according to CNBC. Judges Gregory Katsas and Neomi Rao focused more heavily on jurisdiction and procedure. Politico reported that both judges appeared skeptical the court could directly review the designation itself, while exploring whether it could still strike down specific exclusion orders tied to the label. (politico.com) Rao said the court may not be able to review “designation decisions” under the statute, but could potentially address later directives excluding a company’s products from government use. ### Why does the case turn so much on jurisdiction? The D.C. Circuit is interpreting the relevant national-security procurement law for the first time, according to Politico’s account of the hearing. (cnbc.com) That has turned the case into a fight over whether judges can examine the secretary’s underlying designation or only the follow-on directives that block use of a company’s products. A federal judge in California temporarily blocked the Pentagon’s label last month, but Anthropic still had to challenge the designation in Washington because of the way the statute channels review. (politico.com) The D.C. Circuit refused Anthropic’s emergency request to pause the label on April 8, saying the balance favored the government while also ordering an expedited path to a merits decision. ### What happens next in the case? The three-judge panel — Henderson, Katsas and Rao — took the matter under advisement after Tuesday’s hearing and will issue a written opinion. (politico.com) Politico also reported that the Trump administration told the court last week it is reviewing the designation after saying the Pentagon had missed Anthropic’s earlier reconsideration request because of an email mix-up. Any next step now runs on two tracks: the panel’s written ruling in Washington and the Pentagon’s internal reconsideration of the March 3 designation. Those proceedings will determine whether defense contractors can keep using Claude on Pentagon work while the challenge continues. (politico.com) (cnbc.com)