A federal court has blocked the U.S. government's attempt to label artificial intelligence company Anthropic as a "supply chain risk," with a judge ruling that the Pentagon violated Anthropic's Constitutional rights.

In a lawsuit filed by Anthropic against the Department of Defense, the company accused the Pentagon of using the supply chain risk label to punish Anthropic for refusing to allow its AI to be used for mass surveillance of Americans, and for autonomous lethal weapons. In a March 26 ruling reported on by CNN, Northern California District Judge Rita Lin sided with the company, stating that "punishing Anthropic for bringing public scrutiny to the government's contracting position is classic illegal First Amendment retaliation."

"Moreover, (the Pentagon's) designation of Anthropic as a 'supply chain risk' is likely both contrary to law and arbitrary and capricious," Judge Lin added. "Nothing in the governing statute supports the Orwellian notion that an American company may be branded a potential adversary and saboteur of the U.S. for expressing disagreement with the government."

In the past, the supply chain risk label has exclusively been reserved for foreign adversaries rather than American firms. The designation means that the U.S. government has determined that a company's products or services pose a national security risk, and that any firm carrying the label is banned from being used in federal systems or by federal contractors. Anthropic was initially tagged with the label by the Pentagon in early March, after a $200 million deal fell apart when the DOD demanded unrestricted access to the company's AI systems.

Judge Lin's ruling makes it so that Anthropic can't be labeled a supply chain risk by the DOD while the company's lawsuit plays out in court. However, the court also agreed to delay implementation of the injunction for seven days to allow the government to appeal the decision.