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Federal appeals court upholds Pentagon’s Claude ban
The D.C. Circuit Court of Appeals today upheld the U.S. Defense Department’s ban on Claude.
The decision comes a month after another federal court ruled that the ban is illegal. The diverging decisions stem from the fact that the matter is governed by two different pieces of legislation. Today’s decision focused on one of the laws, while last month’s ruling pertained to the other.
Last July, Anthropic PBC won a $200 million contract to provide the Pentagon with access to Claude models. Shortly thereafter, the company and the Defense Department started discussing the possibility of expanding their partnership. The plan was to make Claude available through a platform called GenAI.mil.
Anthropic’s user agreement prohibits customers from using Claude to conduct mass surveillance of Americans or build autonomous weapons. The Pentagon sought to replace the relevant clause with a provision that permits “all lawful uses.” Anthropic declined to make the change, which led Defense Secretary Pete Hegseth to ban Claude this past June. The model series became inaccessible to not only Pentagon staffers but also defense contractors.
Anthropic filed its appeal shortly thereafter.
The D.C. Circuit Court of Appeals reviewed whether the Pentagon can ban Claude under a 2018 law known as FASCSA. It enables the Defense Secretary to block a supplier if its technology poses a national security risk. The court ruled 2-1 that the Pentagon had “ample support for” its decision to designate Claude as such a risk. The designation was motivated by Anthropic’s model usage restrictions.
“The company encodes restrictions into Claude that prevent the model from performing tasks that Anthropic wishes to prevent,” reads the ruling. “On more than one occasion, these restrictions have stopped Claude from performing tasks requested by government users.”
FASCSA sets forth rules for how supplier bans may be implemented. Notably, it requires the Pentagon to notify a supplier before blocking it and disclose the reasons for the decision. Anthropic argued that the Defense Department had failed to complete the process in the required manner, but the court didn’t accept its reasoning.
“We respectfully disagree with the court’s decision,” Anthropic said in a statement. “Another federal court has already held the government’s parallel designation unlawful. We remain confident in our position and are considering all options, including further review.”
The August ruling that ordered the Pentagon to lift its ban was issued by the U.S. District Court for the Northern District of California. The judge presiding over the case determined that the move is illegal under the 2011 National Defense Authorization Act. The law sets forth different requirements for supplier bans than FASCSA.
Now that both courts have issued their rulings, multiple appeal paths are available to Anthropic. It can seek a rehearing by either the same three-judge panel that issued today’s decision or the full D.C. Circuit Court of Appeals. According to CNBC, Anthropic could also refer the case to the U.S. Supreme Court.
Photo: David B. Gleason/Flickr
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Anthropic lost a legal battle to overturn one of the supply-chain risk labels that the US Department of Defense slapped on the company, as a federal appeals court in DC on Friday refused to second-guess the Trump administration.
“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,” the judges wrote in a majority opinion. “As Anthropic admits, the company encodes restrictions into Claude that prevent the model from performing tasks that Anthropic wishes to prevent.”
Anthropic spokesperson Danielle Cohen says the company remains confident in its position and is considering all options. That could include appealing to a broader panel of the DC Circuit Court of Appeals or the US Supreme Court.
Earlier this year, the Pentagon sanctioned Anthropic under a pair of separate supply-chain laws to remove the company’s Claude AI models from the military and other parts of the federal government by this month. Anthropic executives have said that the company would not allow the government to deploy its current AI models to support autonomous weapons or domestic surveillance. Secretary of Defense Pete Hegseth deemed the stance a significant national security risk.
The laws designating Anthropic had to be challenged in separate courts. A federal judge in San Francisco tossed out one of the supply-chain risk labels in March and confirmed that decision last month, but Friday's ruling means the other one will stay in place indefinitely, meaning the Pentagon’s blocking of Anthropic can continue. Both rulings face the prospect of years of appeals before being fully resolved.
In the immediate aftermath of the designations, Anthropic said it lost out on revenue because customers were concerned about doing business with a government pariah. Anthropic hasn’t provided further updates about how the designations have affected its bottom line. But the company has generally touted growing sales in recent months and is moving toward a potential initial public offering of its shares later this year.
Meanwhile, the Pentagon hasn’t provided detailed updates about its progress in replacing Claude with alternatives such as SpaceX’s Grok, Google’s Gemini, or OpenAI’s GPT models. Some employees at Google and OpenAI have objected to their employers striking a deal with the US military that Anthropic had rejected, citing ethical concerns. But the companies have brushed aside protests and described supporting the US government as crucial.
The new decision by a US appeals court in Washington, DC, was somewhat expected. In April the same panel declined to temporarily block the supply-chain-risk designation after finding that Anthropic failed to meet “stringent requirements” for an immediate reprieve.
During a hearing ahead of their ruling, the three judges on the panel challenged both Anthropic and the US government on their arguments and appeared divided on how to rule on blocking the designation completely. The final decision came in 2-1.
The majority also rejected Anthropic’s claims that its due process and free speech rights were violated, saying that the government followed procedure and that the dispute was standard contract negotiations. The Pentagon “excluded Anthropic from its supply chain based on the company’s refusal to assent to a contract term that the Department deemed essential, not based on the company’s support for greater governmental regulation of AI technology,” the judges wrote.
Anthropic had argued that the government had acted beyond what the supply-chain law allows. But for now, the Pentagon and much of the rest of the Trump administration will be able to continue to steer clear of Claude ahead of Anthropic’s expected IPO.
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A federal appeals court in Washington, D.C., on Friday upheld the Pentagon's blacklisting of Anthropic, a blow to the artificial intelligence company in its months-long battle with the Trump administration.
In a 2-1 decision, Circuit Judge Gregory Katsas and Circuit Judge Neomi Rao rejected Anthropic's argument that the Department of Defense's ban on its Claude models was arbitrary, unauthorized and unconstitutional. Circuit Judge Karen LeCraft Henderson dissented.
"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," Katsas wrote in the opinion for the court.
In March, the DOD labeled Anthropic a supply chain risk, meaning the company purportedly threatened U.S. national security, after negotiations about how the military could use its Claude AI models spiraled out of control. The designation prevents the U.S. military from using Anthropic's models and blocks defense contractors from using them in their work with the agency.
Anthropic sued the Trump administration in San Francisco and Washington, D.C., an effort to reverse its blacklisting. The DOD relied on two distinct designations to justify its supply chain risk action, which meant they had to be litigated in two separate courts.
A San Francisco federal judge ruled last month that one designation was illegal, but the D.C. appeals court upheld the second designation on Friday.
"We respectfully disagree with the court's decision," an Anthropic spokesperson told CNBC in a statement. "Another federal court has already held the government's parallel designation unlawful. We remain confident in our position and are considering all options, including further review."
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