Anthropic asks D.C. appeals court to block Defense Department blacklist designation

Anthropic’s fight with the Pentagon is now centered on a basic question: can the U.S. government label a domestic AI company a national-security supply-chain risk, and can that company get the label lifted in court? On May 19, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit heard opening arguments over the Defense Department’s March designation of Anthropic, which blocks Pentagon contractors from using the company’s AI products on defense work. CNBC reported the hearing marked the latest stage in a monthslong clash between Anthropic and the Trump administration. ### What exactly did the Pentagon do to Anthropic? The Defense Department in early March formally designated Anthropic a supply-chain risk, according to CNBC and Bloomberg. That label requires defense contractors — including companies such as Amazon, Microsoft and Palantir, as CNBC reported from court filings — to certify that they are not using Claude in work tied to the military. Bloomberg said the move led to a ban on government use of Anthropic’s technology. (cnbc.com) Pete Hegseth, the defense secretary, is the named defendant in Anthropic’s lawsuit, CNBC reported. Bloomberg said the designation followed a dispute over safeguards on Anthropic’s technology, while Law.com and Courthouse News reported the government’s objections were tied to Anthropic’s refusal to remove contractual restrictions on uses involving mass surveillance of Americans and lethal autonomous warfare. (cnbc.com) ### Why was the appeals court focused on standing? The D.C. Circuit panel on May 19 appeared skeptical that Anthropic could immediately block the designation, Bloomberg reported. Politico said judges looked for an “off-ramp” and pressed whether the company had standing to pursue the challenge in its current form. (cnbc.com) CNBC reported Anthropic has argued the designation threatens billions of dollars in business and causes reputational harm. That injury is central because the court first has to decide whether Anthropic has shown a concrete, reviewable harm from the Pentagon’s action before reaching the broader national-security questions. That framing — standing first, merits later — is what dominated the hearing coverage. (bloomberg.com) ### Why is this case unusual? The Pentagon’s March action was described by CNBC as the first time an American company had been hit with the supply-chain-risk designation. Bloomberg separately said the designation had previously been associated with firms from adversary nations, and one Bloomberg report compared the consequences Anthropic could face to pariah treatment previously seen with companies such as Huawei. (cnbc.com) That novelty is part of why the case has drawn attention beyond Anthropic itself. Politico reported that an eventual ruling could establish broad powers for the administration to designate domestic companies as threats. Bloomberg said the appeals court’s questioning suggested judges were weighing whether Anthropic had a viable path to stop the label now, even as the underlying power claimed by the executive branch remains in dispute. (cnbc.com) ### Has Anthropic won anything in court already? A San Francisco federal judge in late March granted Anthropic a preliminary injunction in a separate case blocking enforcement of a broader government ban on Claude, CNBC reported. But the D.C. Circuit in April denied Anthropic’s request for a stay that would have paused the supply-chain-risk designation itself, leaving that label in place while the appeal moved forward, according to CNBC, Politico and Bloomberg. (politico.com) That split matters procedurally. Anthropic has partial relief against one part of the administration’s actions, but it still has not persuaded the D.C. appeals court to suspend the Pentagon’s core designation while the case is litigated. ### What happens next? The next step is a ruling from the three-judge D.C. (cnbc.com) Circuit panel that heard arguments on May 19. Politico, CNBC and Bloomberg all reported that the panel did not rule from the bench, so the designation remains in effect unless the court later orders otherwise. Emil Michael, the Pentagon’s chief technology officer, said on CNBC on May 1 that Anthropic “is still a supply chain risk,” even as he described the company’s Mythos cyber model as a separate issue. (cnbc.com) Any written opinion from the D.C. Circuit will determine whether Anthropic can keep pressing to remove the label in that court or must pursue other routes while the Pentagon’s restrictions stay in place. (cnbc.com) (politico.com)