A federal judge in San Francisco raised her concerns at a court hearing over the Pentagon’s decision to designate Anthropic as a supply chain risk, suggesting it might be retaliation for the company’s stance on artificial intelligence (AI) use cases.
In this latest development of the ongoing dispute between Anthropic and the federal government, lawyers for both parties appeared before U.S. District Judge Rita F. Lin on March 24.
The lawsuit stems from a dispute between the Department of Defense (DOD) and Anthropic over the company’s refusal to allow its AI models to be used in mass domestic surveillance or fully autonomous weapons. This dispute resulted in President Donald Trump ordering federal agencies to sever ties with Anthropic, and shortly after, Defense Secretary Pete Hegseth labeled the company a supply chain risk.
Anthropic filed two lawsuits alleging illegal retaliation by the federal government. The federal government defended the Pentagon’s decision to blacklist Anthropic, arguing in a court filing prior to the hearing that the move was lawful and driven by national security concerns.
During her opening remarks on Tuesday’s hearing, Lin made clear that the DOD was free to seek out a different AI vendor but stressed that the issue before the court was whether the government had violated the law in its treatment of Anthropic.
According to the judge, the government’s actions did not appear to align with the national security concerns raised by the Pentagon, “which could be addressed by simply ceasing to use Anthropic’s technology,” she said.
“[This] looks like an attempt to cripple Anthropic,” Lin said, adding that she was concerned that “Anthropic is being punished for criticizing the government’s contracting position.”
In defense of the Pentagon’s decision, the representative for the U.S. government argued that during negotiations Anthropic was going beyond the normal scope of a contractor.
“It’s not just refusing to agree to contracting terms. Instead, it’s raising concerns to DOW about how [it] uses its technology in military missions,” he said.
Under the Trump administration, the DOD was rebranded as the Department of War (DOW).
The federal government also argued that the DOD’s designation of Anthropic as a supply chain risk was driven by concerns that the company could take actions to disrupt or compromise IT systems in the future. The federal government cited hypothetical scenarios, such as Anthropic installing a “kill switch” that could alter the AI’s functioning, as unacceptable risks that justified the Pentagon’s decision to blacklist the company.
Lin, however, appeared unconvinced by the government’s argument, questioning whether the mere fact that a vendor “insists on certain terms” or “asks annoying questions” could justify labeling the company as a supply chain risk.
“That seems a pretty low bar,” she said.
Anthropic’s lawyer argued that the supply chain risk label was “baseless and retaliatory.”
“This is something that has never been done with respect to an American company,” he said during the hearing. “It is a very narrow authority. It doesn’t apply here, and it’s not a normal way to respond to the concerns that have been articulated by the other side.”
In its lawsuit against the government in the U.S. District Court for the Northern District of California, Anthropic has requested a temporary pause of both the DOD’s blacklisting of the company and Trump’s directive banning federal agencies from using its technology.
According to Anthropic, an injunction would not force the government to use its technology or prevent it from choosing another AI vendor. However, without an injunction, the AI company could face significant financial losses and reputational harm.
Lin indicated that she would issue a ruling on the motion for an injunction in the coming days.