Washington – The U.S. Court of Appeals for the District of Columbia Circuit has ruled that the Pentagon had a sufficient basis for identifying Anthropic as a “supply chain risk,” and it dismissed Anthropic’s petition challenging the Secretary of Defense’s decision to blacklist Anthropic over a dispute about the AI company’s Claude product.

The D.C. Circuit’s decision and analysis stand at odds with those of a California judge overseeing a parallel proceeding that involved a different statutory provision. On August 27, 2026, Judge Lin in the Northern District of California granted Anthropic’s motion for summary judgment on several points, agreeing that the Pentagon’s actions violated the First Amendment because it unlawfully retaliated “against Anthropic for constitutionally protected expressive activities.” The California court’s ruling also noted that designating Anthropic as a supply chain risk was “arbitrary and capricious.” In contrast, Judges Katsas and Rao of the D.C. Circuit concluded that the Department had a factual basis for its determination and sufficiently complied with the law.  In addition, the D.C. Circuit panel concluded that the Secretary’s determination did not violate Anthropic’s Fifth Amendment right to due process and that the determination was not First Amendment retaliation because it was not based on Anthropic’s speech, but rather on the company’s refusal to revise a contract term.

The Computer & Communications Industry Association had joined with ITI, SIIA and TechNet in amicus briefs filed in California and Washington DC, pointing out the dangers to the U.S. economy and all companies if a government agency is able to use a tool normally reserved for foreign adversaries as potential retaliation following a dispute. In late March, a federal judge in California cited the tech industry’s amicus brief in her ruling granting Anthropic a preliminary injunction.

“By green-lighting the Pentagon’s circumvention of standard procurement procedures to target Anthropic in this fashion, this ruling should alarm any government contractor. 

“Designating a company as a supply chain risk, a tool normally reserved for foreign adversaries, must be used with discretion and proper procedure – not as punishment for a company over a disagreement. Despite acknowledging that the government cannot take adverse action against a company in response to speech, the court dismisses the government’s public denunciations of Anthropic when announcing its action.

“When companies and investors see the government arbitrarily penalize firms without proper process, they grow concerned that their own business or investment is at risk, and this undermines U.S. innovation and competitiveness at a time when American AI companies face intense foreign AI competitors.”

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