WASHINGTON — Today’s ruling by a three-judge appeals panel against Anthropic in the AI titan’s lawsuit against the Department of Defense is far from the end of the saga, legal experts told Breaking Defense, with Anthropic’s options including further appeals.
The US Court of Appeals for the District of Columbia today upheld the Pentagon’s controversial designation of the company’s products as a “supply chain risk” to national security. That decision allows the Pentagon to ban all use of Anthropic AI, not only by its own personnel, but also by private sector employees actively working on defense contracts.
However, today’s ruling does not impact a separate and parallel lawsuit in the Northern District of California, where Judge Rita Lin ruled last month against the Trump administration’s attempt to ban Anthropic from all federal contracts. The DC court ruling, by contrast, only covers the Defense Department ban.
Pentagon CTO Emil Michael, who has led the charge against Anthropic, took to social media to declare that “the hammer of justice has smashed AnthropicAI[’s] arguments. They are a Supply Chain Risk to the defense industrial base [and] warfighters will sleep better knowing that no private company will insert their opinions in the chain of command.”
Anthropic, for its part, released a statement that kept its options open. “We respectfully disagree with the court’s decision. Another federal court has already held the government’s parallel designation unlawful,” the statement said, referring to the California case. “We remain confident in our position and are considering all options, including further review.”
“The Department had ample support for its conclusion that the continued integration of Claude into the Department’s information systems, by the Department or its contractors, presented a statutorily covered national-security risk,” Judge Gregory Katsas wrote for himself and Judge Naomi Rao, both Trump appointees. “As Anthropic admits, the company encodes restrictions into Claude that prevent the model from performing tasks that Anthropic wishes to prevent. On more than one occasion, these restrictions have stopped Claude from performing tasks requested by government users.”
“I cannot agree that this is the scenario the Congress had in mind when it enacted FASCSA,” the Federal Acquisition Supply Chain Security Act of 2018, dissented Judge Karen Henderson, an appointee of George H.W. Bush. That Act was explicitly passed to protect against sabotage by malignant foreign powers, she wrote, not a US company openly building safety and ethics guardrails into its products.
“Because of the law that was used to declare them a supply chain risk, the case went straight to the DC Circuit, which is an appellate court,” Charlie Bullock of the Institute for Law & AI explained to Breaking Defense in an exchange on X.com. “The only appeal from there is to the Supreme Court (which doesn’t have to accept appeals; it exercises discretion and generally grants only a small percentage of appeal requests) or to an en banc panel of the D.C. Circuit (also discretionary, also not granted super often).”
However, “if a full panel is granted, all bets are off,” said Sean Timmons, a former JAG Corps officer now at law firm Tully Rincky.
The reason, Timmons said, is that the full DC Circuit Court of Appeals has a mix of Trump, Biden, Obama, and Bush appointees. That makes it much more diverse and unpredictable than the randomly selected three-judge panel that issued today’s ruling, which happened to include two Trump appointees.
“You’ve got two people appointed by Trump [saying] we’re not going to step in and undo a decision based on national security parameters, because national security is the sole prerogative of the chief executive,” Timmons told Breaking Defense. “It’s pretty egregious… but when you invoke national security, the courts are kind of like Pontius Pilate: They just want to wash their hands and walk away.”
However, he went on, the Anthropic case is so high profile and so controversial in the legal community that the full court might feel compelled, not only to grant an appeal, but to overturn the panel’s 2-1 ruling. And if any legal team can make that happen, he added, it’s the one Anthropic has assembled.
Bullock independently arrived at a similar conclusion in his analysis online of the 2-1 panel ruling and further prospects. “This was the expected outcome, given the terrible luck Anthropic had with the panel draw,” he posted. “I would expect Anthropic to win before an en banc DC Circuit and likely even before SCOTUS, but they’re not guaranteed any appeal at all.”