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).
Jurisdictional Bifurcation Between Federal Courts
The distinction between Title 10 and Title 41 proved central to the D.C. Circuit’s ruling. While both statutes grant executive agencies the authority to mitigate supply-chain vulnerabilities, they establish markedly different legal standards and procedural pathways for judicial review.
When Congress enacted 41 U.S.C. § 4713 to govern procurement risk management across broader federal civilian agencies, it included a specific jurisdictional requirement: primary and exclusive jurisdiction to review agency designations made under Section 4713 was assigned directly to the U.S. Court of Appeals for the D.C. Circuit.
This jurisdictional arrangement created a bifurcated legal landscape. The U.S. District Court for the Northern District of California possessed the authority to review the executive branch’s compliance with Section 3252 under defense procurement rules. However, it lacked the jurisdictional mandate to evaluate whether the executive branch’s actions were lawful under Section 4713.
As a result, when the D.C. Circuit took up the appeal regarding the Section 4713 designation, it was tasked with interpreting a completely different legal threshold than the one applied by the district court in California.
Bad motive not required
In its ruling, the D.C. Circuit explicitly affirmed the California district court’s legal reasoning regarding Title 10, acknowledging that Section 3252 indeed requires evidence of bad motive or hostile intent. However, the appellate panel explained that this requirement does not carry over to designations made under Title 41.
Writing for the panel, the D.C. Circuit stated:
"We have no quarrel with the Northern District’s conclusion that use of the critical noun adversary, combined with the sinister connotation fairly pervading the string of sabotage, maliciously introduce, and otherwise subvert, indicate that bad motive is required to support a designation under section 3252. Likewise, we have no quarrel with the Northern District’s conclusion that Anthropic has acted with no such bad motive in its dealings with the Department. But as explained at length above, no such bad motive is required to support a designation under the much broader definition set forth in section 4713."
The appellate court emphasized that the legislative language of 41 U.S.C. § 4713 is far more permissive than that of 10 U.S.C. § 3252, granting federal agencies much wider latitude to identify and act upon potential supply-chain vulnerabilities.
Under Section 4713, Congress defined "supply chain risk" in substantially broader terms. Rather than restricting risk to actions taken by a recognized "adversary," Title 41 expands the scope to encompass risks posed by "any person."
Specifically, Section 4713 defines supply chain risk as "the risk that any person may sabotage, maliciously introduce unwanted function, extract data, or otherwise manipulate the design, integrity, manufacturing, production, distribution, installation, operation, maintenance, disposition, or retirement" of covered technology products or systems.
Furthermore, the statute specifies that such risk applies whenever an action could be taken "so as to surveil, deny, disrupt, or otherwise manipulate the function, use, or operation of" those products or the sensitive information stored on or transmitted through them.
The appellate court noted that by replacing the word "adversary" with "any person" and expanding the list of covered actions to include non-adversarial manipulations, data extractions, and operational disruptions, Congress intentionally created a legal framework under Section 4713 that does not depend on demonstrating bad faith, hostile origin, or malicious intent on the part of the technology developer.
Broader Implications for Technology Procurement
The D.C. Circuit’s ruling establishes an important legal precedent regarding executive branch authority over federal technology procurement and risk management. By confirming that Section 4713 does not require proof of an adversarial motive, the ruling provides federal procurement officials with a powerful regulatory tool to restrict software, artificial intelligence systems, or hardware components based on structural, operational, or systemic risk factors alone.
Under the appellate court’s interpretation, federal agencies acting under Title 41 do not need to prove that a technology vendor actively intends to harm government operations or that the vendor operates as an agent of a hostile foreign power. Instead, agencies can evaluate supply-chain risk based on the potential operational vulnerabilities, data extraction risks, or functional manipulations that could arise from deploying a particular technology within government networks.
The ruling also highlights the structural importance of Congress’s decision to concentrate legal review of Section 4713 procurement designations exclusively within the D.C. Circuit. By channeling legal challenges through a single appellate venue, the framework ensures consistent judicial interpretation of civilian federal procurement designations, preventing contradictory rulings across disparate federal district courts nationwide.
While Anthropic successfully demonstrated in the Northern District of California that it harbored no bad motive or adversarial intent under the defense-specific standards of 10 U.S.C. § 3252, the D.C. Circuit’s decision confirms that the federal government’s broader authority under 41 U.S.C. § 4713 remains legally viable. The decision leaves the executive branch with robust statutory backing to maintain supply-chain risk restrictions under civilian procurement law, illustrating the high degree of deference federal courts accord to agency risk assessments when grounded in broad statutory definitions enacted by Congress.
