The department’s “relationship with Anthropic has deteriorated to the extent that Anthropic’s CEO has publicly described the Department’s statements regarding the controversy as ‘completely false’ and ‘just straight up lies,’” the court said. “Under these circumstances, requiring the Department to prolong its use of Anthropic’s AI technology, whether directly or through contractors, strikes us as a substantial judicial imposition on military operations. And, of course, we do not lightly override the Department’s judgments on matters involving national security.”

While the court said the balance of equities favors the government in determining whether to issue a stay, it acknowledged that Anthropic raised substantial questions that should be addressed quickly.

“In our view, the equitable balance here cuts in favor of the government,” the court said. “On one side is a relatively contained risk of financial harm to a single private company. On the other side is judicial management of how, and through whom, the Department of War secures vital AI technology during an active military conflict. For that reason, we deny Anthropic’s motion for a stay pending review on the merits. Nonetheless, because Anthropic raises substantial challenges to the determination and will likely suffer some irreparable harm during the pendency of this litigation, we agree with Anthropic that substantial expedition is warranted.”

The Computer & Communications Industry Association (CCIA), a trade group that filed briefs in both cases, said that tech companies are concerned about the “Pentagon’s means of blacklisting Anthropic without following typical procurement procedures,” and that the appeals court “denial will prolong ambiguities regarding whether political considerations can drive federal procurement.”

“Designating a company as a supply chain risk is a tool normally reserved for foreign adversaries, and should be used with discretion and proper procedure,” CCIA CEO Matt Schruers said. “It is risky to US innovation and competition to allow the government to unfairly discourage doing business with a US AI company as it competes with foreign AI companies.”