US appeals court upholds Anthropic’s supply-chain risk designation

A federal appeals court in Washington, DC, rejected Anthropic’s challenge to a Pentagon designation labeling it a supply-chain risk. In a 2-1 ruling, the judges said Claude’s continued integration into the Defense Department’s systems or those of its contractors could present a national-security risk. The decision allows the Pentagon to keep Anthropic out of its supply chain and avoid its models across the federal government. Anthropic says it is considering an appeal to the full appeals court or the US Supreme Court.

Ars Technica notes that the ruling reviewed a broader law, Section 4713, which does not require malicious intent to establish the risk. A federal court in California had overturned another designation based on Section 3252, finding that the statute requires a risk of sabotage or another malicious act by an adversary. According to g1, Anthropic says the dispute has already cost it billions of dollars in lost business and harmed its reputation.