A federal appellate court in Washington, D.C., has issued a major decision regarding the United States government’s blacklisting of artificial intelligence developer Anthropic, highlighting a significant statutory distinction in how federal agencies can restrict technology vendors on supply-chain risk grounds.
The U.S. Court of Appeals for the District of Columbia Circuit ruled that the federal government possesses broad authority under federal procurement statutes to designate technology companies as supply-chain risks, even in the absence of evidence showing bad motive, subversion, or malicious intent. The decision comes weeks after a federal judge in the U.S. District Court for the Northern District of California ruled that the administration’s blacklisting of Anthropic was illegal under a separate military procurement statute.
While the D.C. Circuit did not overturn the California district court’s interpretation of defense procurement laws, it clarified that federal agencies operate under two distinct statutory frameworks when taking supply-chain actions. Because Congress granted the D.C. Circuit exclusive appellate jurisdiction over procurement designations made under civilian procurement statutes, the appellate panel held that the executive branch could maintain its supply-chain risk designation under a broader statutory standard that does not require proof of bad motive or adversarial status.
The dual court proceedings underscore the complex legal mechanics governing how the federal government restricts technology vendors, as well as the contrasting legal hurdles created by different statutes passed by Congress to safeguard federal technology infrastructure.
Statutory Background and the District Court Ruling
The legal dispute stems from executive branch actions designating Anthropic as a supply-chain risk, effectively barring or restricting its technology from federal procurement channels. Anthropic challenged the action in federal court, leading to parallel legal evaluations across different judicial venues.
Last month, a judge in the U.S. District Court for the Northern District of California ruled against the federal government’s blacklisting of Anthropic, determining that the executive branch had exceeded its statutory authority. The district court evaluated the blacklisting under Title 10 of the United States Code, specifically 10 U.S.C. § 3252, which provides statutory authority for managing supply-chain risks within defense-related procurement.
Under Section 3252, a supply-chain risk is narrowly defined by statute. The law limits such risks specifically to "the risk that an adversary may sabotage, maliciously introduce unwanted function, or otherwise subvert" a covered federal system.
In reviewing the record, the Northern District of California found that Anthropic did not fit this narrow definition. The district court concluded that the statutory text of Section 3252 requires clear evidence of bad motive or adversarial intent. Because Anthropic is not an adversary and there was no factual basis demonstrating that the company had acted with malicious intent to sabotage, subvert, or compromise federal technology systems, the district court ruled that the government’s blacklisting action under Title 10 was illegal.
However, while the district court focused its review on Section 3252, the federal government had grounded its blacklisting decision in two separate federal statutes simultaneously: Title 10 (10 U.S.C. § 3252) and Title 41 (41 U.S.C. § 4713).
