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group of authors filed suit against us claiming infringement of copyrighted books in Bartz. Specifically, the class 
action  plaintiffs  alleged  that  in  the  process  of  building  and  operating  our  models,  we  unlawfully  copied 
copyrighted  works  controlled  by  the  authors.  Though  we  dispute  any  allegation  of  wrongdoing,  in  September 
2025, we entered into a settlement agreement with the plaintiffs to settle the case for $1.5 billion, which was 
approved by the district court in July 2026.

In each of the actions, we believe we have meritorious defenses and dispute any allegation of wrongdoing. Legal 
proceedings related to these matters can have an adverse effect on us because of defense and settlement costs 
individually and in the aggregate, diversion of management resources, and other factors.

Other Matters

In February 2026, in response to our publicly stated position that our technology should not be used for mass 
domestic  surveillance  or  fully  autonomous  weapons,  the  President  of  the  United  States  stated  that  he  had 
directed that all federal executive agencies cease using our technology. At the same time, the Secretary of War 
directed the Department of War to designate Anthropic as a “supply-chain risk to national security” and stated 
that  “effective  immediately,  no  contractor,  supplier,  or  partner  that  does  business  with  the  United  States 
military may conduct any commercial activity” with us. On March 4, 2026, the Department of War sent us two 
letters—one pursuant to 10 U.S.C. § 3252 and the other pursuant to Section 4713 of the FASCSA—asserting that 
our models, platform, and applications present a supply-chain risk. These actions referenced above are defined 
herein  as  “Challenged  Actions.”  We  vigorously  challenged  the  Challenged  Actions  in Anthropic  PBC  v. 
Department of War, et al.  (N.D.  Cal.)  and Anthropic PBC v. Department of War, et al. (D.C. Cir.). After first 
obtaining  an  order  from  the  United  States  District  Court  for  the  Northern  District  of  California  that 
preliminarily enjoined the Department of War’s directive and Section 3252 supply-chain risk designation of us 
and  preliminarily  enjoined  the  other  defendant  agencies  from  implementing  the  Presidential  directive  until 
final resolution of the lawsuit, we subsequently, on August 27, 2026, obtained an order from the United States 
District Court for the Northern District of California that largely granted summary judgment in our favor. The 
court ruled that the Challenged Actions were retaliatory acts meant to punish us for speech protected under the 
First Amendment to the United States Constitution and violated our rights under the Due Process Clause of the 
Fifth  Amendment  to  the  United  States  Constitution.  The  court  also  held  that  the  Secretary  of  War’s  actions, 
particularly with respect to 10 U.S.C. § 3252, violated the Administrative Procedure Act because they were in 
excess  of  statutory  authority,  contrary  to  law,  and  arbitrary  and  capricious.  The  court  entered  final  judgment 
largely in our favor. The defendants filed a notice of appeal of the preliminary injunction. The D.C. Circuit Court 
of  Appeals,  however,  denied  our  motion  to  stay  the  Secretary  of  War’s  Section  4713  designation  of  us  as  a 
supply-chain risk pending review on the merits. On September 25, 2026, in a 2-1 split decision, the D.C. Circuit 
Court of Appeals denied our petition for review, ruling that the Department of War’s Section 4713 supply-chain 
risk  designation  was  proper,  and  that  our  rights  under  the  First  Amendment  and  Due  Process  Clause  of  the 
Fifth  Amendment  were  not  violated.  We  filed  a  petition  for  rehearing  en  banc  asking  the  full  D.C.  Circuit  to 
review  the  panel’s  decision.  We  cannot  predict  the  ultimate  outcome  of  these  lawsuits.  While  we  continue  to 
work  with  government  agencies,  we  cannot  be  certain  that  the  resolution  of  these  lawsuits  will  not  adversely 
affect our ability to sell to government agencies and other customers that sell products and services to the U.S. 
government, and thus on our business, financial condition, and results of operations. 

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