A federal appeals court has denied AI firm Anthropic’s bid to halt the Pentagon’s ‘supply chain risk’ designation. This ruling allows the Department of Defense to continue excluding Anthropic’s technology from military contracts, citing national security concerns. While Anthropic faces financial harm, the court prioritized government access to vital AI during conflict.

Anthropic has lost a court bid to temporarily stop Pentagon from blacklisting the company and designate it as ‘supply chain risk’. A federal appeals court in Washington, DC has denied Anthropic’s request to temporarily block the Department of Defense’s blacklisting of the AI company. The ruling comes after a judge in San Francisco federal court late last month, in a separate but related case, granted Anthropic a preliminary injunction that bars the Trump administration from enforcing a ban on the use of its Claude model.The DOD declared Anthropic a supply chain risk in early March, meaning that use of the company’s technology purportedly threatens U.S. national security. The label requires defense contractors to certify that they don’t use Anthropic’s Claude AI models in their work with the military.

What the judge said over-ruling the Anthropic appeal

“In our view, the equitable balance here cuts in favor of the government,” the appeals court said in its decision. “On one side is a relatively contained risk of financial harm to a single private company. On the other side is judicial management of how, and through whom, the Department of War secures vital AI technology during an active military conflict. For that reason, we deny Anthropic’s motion for a stay pending review on the merits.”In the ruling, the court acknowledged that Anthropic “will likely suffer some degree of irreparable harm absent a stay,” but that the company’s interests “seem primarily financial in nature.” While the company claimed the DOD was standing in the way of its right to free speech, “Anthropic does not show that its speech has been chilled during the pendency of this litigation,” the order said. Because of the harm Anthropic is likely to suffer, the appeals court said “substantial expedition is warranted.”In its appeal to the court, Anthropic had asked to review the Pentagon’s blacklisting. The company argued that ban is a form of retaliation that’s unconstitutional, arbitrary, capricious and not in accord with procedures required by law, according to court filing.

What the court decision means for Anthropic

With the split decisions by the two courts, Anthropic is for now excluded from DOD contracts. However, the company is able to continue working with other government agencies while litigation plays out. Defense contractors will be prohibited from using Claude in their work with the agency, but they can use it for other cases.

Anthropic on court decision

An Anthropic spokesperson said in a statement after the ruling that the company is “grateful the court recognized these issues need to be resolved quickly” and that it’s “confident the courts will ultimately agree that these supply chain designations were unlawful.” The company added, “While this case was necessary to protect Anthropic, our customers, and our partners, our focus remains on working productively with the government to ensure all Americans benefit from safe, reliable AI.”