A three-judge panel heard arguments Tuesday from Anthropic and the Justice Department over the Pentagon's supply-chain risk designation
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Anthropic and the Justice Department will argue their case Tuesday before a federal appeals court in Washington, D.C., over the Defense Department's designation of the AI company as a supply-chain risk. Fifteen minutes are allotted to each side, after which the three-judge panel will deliberate and release a written ruling, according to CNBC.
Sitting on the bench are Judge Karen Henderson, Judge Gregory Katsas, and Judge Neomi Rao.
Anthropic sued Defense Secretary Pete Hegseth and the DOD in March after the agency declared it a supply-chain risk — a label historically applied to foreign adversaries. Under the designation, any contractor working with the military must sign off that Claude models play no role in that work.
The government's pre-argument brief warned that Anthropic's ability to "encode limitations" into its models amounts to an "untenable national-security risk." According to the brief, Hegseth concluded the company had "undermined the substantial trust required to sustain the relationship" by being positioned to "manipulate its model to enforce its own moral and policy judgments about the military's appropriate use of the technology."
In its own filing, Anthropic disputed that claim, arguing it lacks any factual grounding and therefore gives the government "no basis" on which to justify the supply-chain risk label. The company also argues that Hegseth and the DOD violated the Constitution and existing procedures. "The Court should hold the designation unlawful," Anthropic's lawyers wrote.
The designation followed a breakdown in negotiations between the two sides. The DOD sought unfettered access to Anthropic's models across all lawful purposes, while Anthropic sought assurance that its technology would not be used for autonomous weapons or domestic mass surveillance. After talks collapsed, Hegseth blacklisted the company.
An April ruling left the designation standing after the court refused to pause it, though the bench moved to fast-track proceedings after acknowledging that Anthropic "will likely suffer some irreparable harm" while the case is pending, per a court order.
A parallel lawsuit is also moving through federal court in San Francisco, a venue necessitated by the fact that the DOD grounded its action in two separate designations, each requiring its own judicial forum. That court sided with Anthropic on a preliminary basis, issuing an injunction that keeps the company's models available to federal agencies outside the Defense Department for the duration of the proceedings. "Nothing in the governing statute supports the Orwellian notion that an American company may be branded a potential adversary and saboteur of the U.S. for expressing disagreement with the government," that judge wrote.
Anthropic was absent from a recent Pentagon announcement in which seven other major tech companies — including Google $GOOGL, OpenAI, Microsoft $MSFT, and Amazon $AMZN Web Services — struck deals to bring their technology onto the Defense Department's classified networks. President Donald Trump said last month that a deal between the DOD and Anthropic is "possible."
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