Appeals court rejects Anthropic's bid to temporarily halt Pentagon designation

A federal appeals court has rejected Anthropic's bid to temporarily halt the Pentagon's labelling of the artificial intelligence company as a supply chain risk, finding the firm failed to meet the strict requirements for an emergency stay.

The order, issued Wednesday evening by a three-panel judge in Washington, D.C.'s federal appeals court, blocked Anthropic's bid to pause the designation, but granted its request for expedition. Oral arguments are slated to begin May 19.

The decision breaks from that of a federal judge in California, who temporarily blocked the supply chain risk designation in a ruling late last month.

Anthropic filed suits in both California and D.C. contesting both the Pentagon's designation, which is typically reserved for foreign adversaries, and President Trump's directive for civilian agencies to stop using Anthropic's products.

Anthropic demanded its technology not be used in fully autonomous lethal weapons or for the mass surveillance of Americans. The Pentagon has insisted it be allowed to use Claude for "all lawful uses."

The appeals panel recognized Anthropic is likely to face "some degree" of irreparable harm without a stay, though the exact amount of Anthropic's financial harm is not "fully clear," the order stated.

Anthropic's lawyers have argued the designation could cost the firm billions of dollars in revenue.

Further, the judges suggested Anthropic actually benefitted financially given the surge in app store downloads amid its riff with the Pentagon.

Meanwhile, the panel also recognized a stay would force the U.S. military to prolong relations with "an unwanted vendor of critical AI services" amid the ongoing military conflict with Iran.

"In our view, the equitable balance here cuts in favor of the government," the panel said. "On one side is a relatively contained risk of financial harm to a single private company. On the other side is judicial management of how, and through whom, the Department of War secures vital AI technology during an active military conflict."

The panel consisted of two Trump appointees -- Judges Neomi Rao and Gregory Katsas -- along with Karen LeCraft Hendersdon, an appointee of former President George H.W. Bush.

Acting Attorney General Todd Blanche lauded the D.C. Circuit order, calling it a "resounding victory for military readiness."

"Our position has been clear from the start -- our military needs full access to Anthropic's models if its technology is integrated into our sensitive systems," Blanche wrote in a post on X. "Military authority and operational control belong to the Commander-in-Chief and Department of War, not a tech company."

A spokesperson for Anthropic said the company is "grateful the court recognized these issues need to be resolved quickly and confident the courts will ultimately agree that these supply chain designations were unlawful."

"While this case was necessary to protect Anthropic, our customers, and our partners, our focus remains on working productively with the government to ensure all Americans benefit from safe, reliable AI," the spokesperson added.