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Image source,  AFP via Getty Images      By Osmond Chia Business reporter      Published 28 August 2026, 03:57 BST        Updated 7 hours ago       A judge has ruled the US Department of Defense acted unlawfully when it designated artificial intelligence (AI) startup Anthropic a supply chain risk, calling the move "illegal and baseless".  The company argued in the lawsuit that Defense Secretary Pete Hegseth overstepped his authority with the new designation. It followed Anthropic's refusal to allow the military to use its AI models for things that included surveillance or autonomous weapons. US district judge Rita Lin said in the ruling that citing national security "is not a blank check to punish and retaliate against government critics". Anthropic welcomed the ruling. The BBC has contacted the Pentagon and the White House for comment. Anthropic is focused on "working productively with the government to harness AI for our national security so all Americans benefit from this technology," a spokesperson told the BBC. Judge Lin said in the court filing that the Defense Department had acted unlawfully to order firms that do business with the US military to boycott Anthropic. The Pentagon (https://www.bbc.co.uk/news/articles/cvg3vlzzkqeo) designated Anthropic as a supply-chain risk in February - a law typically reserved for companies based in countries that pose a threat to the US.  It marked the first time an American company had been publicly designated as such. Anthropic's lawsuit said the government's actions were both "unprecedented and unlawful". The Claude-maker said its models were (https://www.bbc.co.uk/news/articles/cvg3vlzzkqeo) not reliable enough to be safely used in weapons systems for the military. It added that it opposed its use for domestic surveillance as a violation of rights.  The Pentagon said at the time that private companies should not be able to constrain military action.  The White House had previously said Anthropic was "a radical left, woke company" attempting to control military activity" and argued the military was beholden to the US Constitution, "not any woke AI company's terms of service". The Pentagon also argued that Anthropic's refusal to accept new contract terms raised concerns over what the company could do with its technology. Anthropic said in its lawsuit that its business had been impacted by the government's actions and its right to freedom of speech had been violated. Judge Lin said (https://www.bbc.co.uk/news/articles/cvg4p02lvd0o) during an earlier round in the lawsuit that the government was trying to "cripple" the company and "chill public debate" over military use of AI. "This appears to be classic First Amendment retaliation," the judge added.     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