A US appeals court has upheld the Pentagon’s decision to label Anthropic a supply chain risk. The label bars the military and its contractors from using Anthropic’s Claude models. In a 2-1 ruling on Friday, the DC Circuit court of appeals denied Anthropic’s petitions to overturn the designation.
Circuit Judge Gregory Katsas wrote the opinion, joined by Circuit Judge Neomi Rao. Circuit Judge Karen LeCraft Henderson dissented. Anthropic said it disagreed with the decision, CNBC’s Ashley Capoot reported.
“We remain confident in our position and are considering all options, including further review,” an Anthropic spokesperson told CNBC.
What the court decided
The Department of War, as the administration now calls the Pentagon, acted under a 2018 supply chain security law. Anthropic had refused to relax contract terms on Claude, the opinion says. Those terms barred its use for lethal autonomous warfare or domestic surveillance.
Anthropic argued that the exclusion was arbitrary, not allowed by the law and unconstitutional. The court rejected all three arguments.
“The Department had ample support for its conclusion that the continued integration of Claude into the Department’s information systems, by the Department or its contractors, presented a statutorily covered national-security risk,” Katsas wrote.
Anthropic builds restrictions into Claude that stop it from doing tasks the company wants to prevent, the court noted. Those restrictions had more than once stopped Claude from doing tasks government users asked for. A dispute also arose over whether the contract barred Claude’s use in an ongoing overseas military operation, the opinion says.
On free speech, the court found that the Pentagon had acted over a contract term it saw as essential. Anthropic had refused to accept it. The Pentagon had not acted over the company’s support for more government regulation of AI, the judges wrote. Anthropic had also received prompt notice and a fair chance to contest the exclusion, they found.
“But in our Republic, it is the President and the Secretary of War who must determine how best to balance the competing risks,” the majority wrote.
The dissent
Henderson disagreed on how to read the law. The law covers a supplier that could “sabotage”, “extract data” or “otherwise manipulate” a product. Anthropic read “manipulate” as meaning deliberate, deceptive acts. The majority read it more broadly.
Congress passed the law after warnings that hostile states and other bad actors were getting into federal systems through suppliers, Henderson wrote. That history, she wrote, does not cover a contractor’s “honest and upfront enforcement of restrictions” on how the government uses its product.
Two courts, two answers
The Pentagon labelled Anthropic a supply chain risk in March, and Anthropic sued the government days later. The Pentagon relied on two separate designations, so the case ran in two courts, CNBC reported.
In August, a federal judge in San Francisco struck down the other designation. Friday’s ruling leaves the second one in place.
“Another federal court has already held the government’s parallel designation unlawful,” the Anthropic spokesperson said.