Anthropic and U.S. government to face off in DC court over blacklisting of AI company

A federal appeals court in Washington, D.C., is set to hear arguments on Tuesday in Anthropic’s lawsuit over its blacklisting by the Department of Defense, the latest faceoff in the monthslong clash between the Pentagon and one of the country’s leading artificial intelligence companies.

The U.S. Department of Justice, on behalf of the DOD, and Anthropic will each have 15 minutes to present their case to a panel of three circuit judges, according to an order earlier this month. Judge Karen Henderson, Judge Gregory Katsas and Judge Neomi Rao will then take the matter under advisement and issue a written opinion.

Proceedings will begin at 9:30 a.m. ET on Tuesday.  

Anthropic sued Defense Secretary Pete Hegseth and the DOD in March after the agency declared the AI startup a supply chain risk, meaning it purportedly threatens U.S. national security. The label has historically been reserved for foreign adversaries, and requires defense contractors to certify that they will not use Anthropic’s Claude models in their work with the military.

The designation landed after months of tense negotiations between Anthropic and the DOD collapsed. The DOD wanted Anthropic to grant the Pentagon unfettered access to its models across all lawful purposes, while Anthropic wanted assurance that its technology would not be used for fully autonomous weapons or domestic mass surveillance. 

The two sides failed to reach an agreement, and Hegseth blacklisted Anthropic and bashed the company on social media. Anthropic CEO Dario Amodei said the company had “no choice” but to challenge the supply chain risk designation in court. 

The DOD continued to use Anthropic’s models to support its military operations against Iran, and President Donald Trump told CNBC last month that a deal between the DOD and the startup is “possible.”

The appeals court denied Anthropic’s request to temporarily block the designation in April, which means it will remain in effect as the lawsuit plays out. However, the judges agreed to expedite the case since Anthropic “will likely suffer some irreparable harm” during the litigation, according to an order. 

In a brief ahead of Tuesday’s proceedings, the government argued Anthropic could “encode limitations” into its model, which presents an “untenable national-security risk.” Hegseth determined that Anthropic “undermined the substantial trust required to sustain the relationship,” according to the brief, particularly since Anthropic could “manipulate its model to enforce its own moral and policy judgments about the military’s appropriate use of the technology.”

Anthropic, in a separate brief, said the notion that it could encode limits in future models is unsupported and provides “no basis” for a supply chain risk designation. 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.  

In addition to its lawsuit in Washington, D.C., Anthropic filed a separate but related suit in federal court in San Francisco. The DOD relied on two distinct designations to justify its supply chain risk action, which means they have to be litigated in two separate courts. 

Anthropic was granted a preliminary injunction in its San Francisco case, allowing government agencies other than the DOD to use Anthropic’s models while the litigation unfolds. 

“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,” the judge wrote.

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