Anthropic Asks Appeals Court to Reconsider Pentagon AI Risk Designation

Anthropic has asked a federal appeals court to reconsider its decision upholding the Pentagon’s designation of the artificial intelligence company as a national-security supply-chain risk, challenging the court’s interpretation of federal law and its rejection of claims that the government retaliated against the company.

The petition, filed on October 13 with the U.S. Court of Appeals for the District of Columbia Circuit, seeks a rehearing before the original three-judge panel or the full court. It follows a September 25 ruling that upheld the designation under the Federal Acquisition Supply Chain Security Act.

Anthropic argues that the court interpreted the law too broadly, allowed the Pentagon to bypass required procedural safeguards, and gave insufficient weight to evidence that the government acted in response to the company’s public positions on AI safety. The court has not agreed to rehear the case.

The dispute began after Anthropic refused to remove restrictions preventing its Claude AI models from being used for mass surveillance of Americans and fully autonomous weapons. The Pentagon wanted the company to accept contract terms permitting “all lawful uses” of its technology, arguing that private restrictions could interfere with legitimate military operations.

The appeals court’s September decision concluded that the Pentagon could treat Anthropic’s restrictions as a supply-chain risk because they could prevent its technology from performing lawful government functions. The majority held that the statute did not require proof that a supplier intended to act maliciously.

Anthropic disputes that interpretation, arguing that the law targets threats such as sabotage and malicious interference rather than a supplier’s disclosed decisions about how its product may be used. Its petition invokes the Supreme Court’s 2024 decision in Fischer v. United States to challenge the majority’s reading of the statutory language.

The company also contests the Pentagon’s decision to impose the designation without advance notice and an opportunity to respond. Anthropic argues that the government did not adequately establish the urgency needed to bypass those safeguards and disputes assertions that the company could alter or disable Claude during military operations.

On the First Amendment claim, Anthropic points to public statements by Defense Secretary Pete Hegseth criticizing the company’s position and the timing of the designation. The appeals court acknowledged that Anthropic’s advocacy was protected speech but concluded that the company had not established a sufficient causal connection between that speech and the government’s action. The majority attributed the dispute to the failed contract negotiations.

Judge Karen LeCraft Henderson dissented from the September ruling, arguing that the majority had extended the supply-chain statute beyond its intended scope. Judges Gregory Katsas and Neomi Rao formed the majority.

The case is distinct from a separate California proceeding in which U.S. District Judge Rita Lin ruled on August 27 against important parts of the government’s actions under a different statute. Anthropic cites the contrasting outcomes in support of its request for full-court review, but the D.C. Circuit held that its case involved a separate statutory authority.

The designation has affected the use of Anthropic technology in covered Defense Department procurement. On October 5, a Pentagon official told the BBC that the department had ceased using Anthropic products.

Anthropic says the designation has caused billions of dollars in lost business and damaged its reputation. The claimed financial losses have not been independently established by the available reporting.

The appeals court must now decide whether to grant rehearing or leave its September ruling in place. If rehearing is denied, Anthropic may seek review by the U.S. Supreme Court.

Sources: Anthropic’s rehearing petition; D.C. Circuit opinion; Anthropic’s February statement.