Lawyers for the Department of War and Anthropic sparred in a California federal court on Tuesday over Anthropic’s challenge to the Pentagon labeling it a supply-chain risk to national security and banning all government contractors from using the company’s sweeping AI tools.
The case—which involves a historic first in that the Pentagon, renamed the Department of War (DOW), labeled a U.S.-led business as a supply-chain risk to national security—is rooted in a contract negotiation that escalated quickly. The DOW wanted to add a blanket “all lawful use” clause to its contracts with the AI firm so the military could use Anthropic’s Claude tool for any legal purpose. Anthropic balked at the military using Claude for lethal autonomous warfare and mass surveillance of Americans. Anthropic, led by founder Dario Amodei, said it hasn’t thoroughly tested those uses and doesn’t believe they work safely. The DOW claimed those guardrails were unacceptable and that military commanders need latitude to make determinations on missions.
On Feb. 27, President Trump posted on Truth Social directing “EVERY” federal agency to “IMMEDIATELY CEASE” all use of Anthropic’s tools. That same day in a post on X, Secretary of War Pete Hegseth labeled Anthropic a “supply-chain risk” and said “no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic.” The risk label is usually reserved for nation states, foreign adversaries, and other threats.
Anthropic followed with a lawsuit on March 9, alleging the government “retaliated against it” for expressing its views on safety guardrails and had violated the First Amendment in doing so. It also claimed the government violated the process laid out in the Administrative Procedure Act and the Fifth Amendment’s right to due process. The government said the administration’s actions were in response to Anthropic’s refusal to implement those terms in the contract during the negotiation and argued free speech wasn’t at issue in the case. Deputy Assistant Attorney General Eric Hamilton said the government has unrestricted power to determine which companies it will contract with. Hamilton said Anthropic’s conduct had raised concerns that future software updates could be used as a “kill switch” in military operations.
District Judge Rita F. Lin was skeptical and in her opening statements described the case as a “fascinating public policy debate” over Anthropic’s position versus the government’s military needs, but said her role wasn’t to “decide who is right in that debate.”
Rather, Lin said the real question to be decided by the court was whether the government “violated the law” when it went beyond just not using Anthropic’s AI services and finding a more permissible AI vendor to work with.
“After Anthropic went public with this contracting dispute, defendants seemed to have a pretty big reaction to that,” Lin said.
The reactions included banning Anthropic from ever having a government contract—excluding other entities like the National Endowment for the Arts from using it to design a website; Hegseth’s directive that anyone who wants to do business with the U.S. military sever their commercial relationship with Anthropic; and, designating Anthropic as a supply-chain risk.
“What is troubling to me about these reactions is that they don’t really seem to be tailored to the stated national security concern,” said Lin. If the concern is about chain of command, DOW could just stop using Claude and go on its way, she said.
“One of the amicus briefs used the term attempted corporate murder,” she added. “I don’t know if it’s murder, but it looks like an attempt to cripple Anthropic. And specifically my concern is whether Anthropic is being punished for criticizing the government’s contracting position in the press.”
The amicus, friend-of-the-court, briefs in the case have drawn a variety of voices including from Microsoft, retired military officers, and engineers and researchers from OpenAI and Google. Nearly all support Anthropic’s position seeking an injunction the supply-chain risk designation.
The brief Lin referred to came from investors and the “Freedom Economy Business Association.” The brief referred to an X post written by Dean Ball, Trump’s former senior policy advisor for AI and emerging tech.
“Nvidia, Amazon, Google will have to divest from Anthropic if Hegseth gets his way,” Ball wrote. “This is simply attempted corporate murder. I could not possibly recommend investing in American AI to any investor; I could not possibly recommend starting an AI company in the United States.”
The American Federation of Government Employees, a union of 800,000 federal workers, said in its amicus brief that the Trump administration had a pattern of using national security concerns as a pretext for retaliation against free speech.
Microsoft wrote that a ban on Anthropic would hurt its own business, and could chill future defense-industry investment and engagement with AI.
The Human Rights and Technology Justice Organization brief didn’t take a position who should win in court, but argued against militarized AI broadly, and stating that its use could lead to catastrophic human rights risks.
Lin said she’ll issue an opinion this week.
This story was originally featured on Fortune.com
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