A federal judge in California ruled Thursday that the Department of Defense violated the First Amendment when it designated artificial intelligence company Anthropic a supply chain risk earlier this year, handing the Claude-maker a significant legal victory in its ongoing battle with the Trump administration.
U.S. District Judge Rita Lin found that the DOD acted out of retaliation rather than any legitimate national security concern, designating Anthropic a supply chain risk "based on a desire to make a public example" out of the company.
"Neither the Constitution nor the federal statute invoked by Defendants allows them to impose sweeping penalties based principally on Anthropic's critique of the Administration's views," Lin wrote in her order.
Lin also found that the designation violated the Due Process clause of the Constitution, further undermining the legal basis for the Pentagon's action.
The dispute traces back to March, when the DOD formally designated Anthropic a supply chain risk after contract negotiations between the two parties collapsed. Anthropic had sought assurances that its technology would not be deployed in fully autonomous weapons systems or used for domestic mass surveillance. The DOD, for its part, demanded unfettered access to Claude across all lawful purposes.
When talks broke down, Anthropic became the first American company to be publicly named a supply chain risk by the Pentagon — a designation that barred defense contractors from using its technology in their work with the agency.
In her ruling, Lin noted the government's own characterization of the dispute. "Defendants claim that because of Anthropic's 'increasingly hostile manner through the press' and its criticism of the Department of War's views on AI use, Defendants 'cannot trust Anthropic to ensure the integrity of its models,'" she wrote — adding that such reasoning did not constitute an "articulable basis" for the action, even accounting for deference owed to the government on national security matters.
Anthropic responded to the ruling with measured approval. "We welcome the court's ruling that this supply chain risk designation was unlawful," a company spokesperson told CNBC. "We remain focused on working productively with the government to harness AI for our national security so all Americans benefit from this technology."
The company had filed parallel lawsuits in San Francisco and Washington, D.C., because the DOD relied on two distinct legal designations to justify its supply chain risk action — requiring separate litigation in each jurisdiction. Lin's ruling addresses only the California case. Anthropic's suit in D.C. remains ongoing, meaning the company technically retains its supply chain risk status until that matter is resolved.
The California ruling clears a significant legal hurdle for Anthropic as the company moves toward what analysts have characterized as a near-record initial public offering. If Anthropic is able to restore its relationship with the Pentagon, it could also recover business opportunities with defense contractors that were severed by the original designation. The company has stated that its lawsuits aim to return its operations to their status before the supply chain risk designation — not to compel the DOD to resume work with it.
With the D.C. litigation still pending, the full legal resolution of Anthropic's dispute with the federal government remains incomplete, and the court in that jurisdiction could reach a different conclusion on the second designation.
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