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In this context, that designation just means that the DOD won’t use your product and it’s suppliers can’t use your product for DOD-facing activity. That’s not “thuggery” it’s something any buyer can do. Walmart or whatever could do it too.
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Isn't that textbook tortious interference with a business relationship?
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No, tortious interference requires use of means that are independently wrongful, such as fraud, blackmail, etc. Preventing someone from doing business with someone else isn’t by itself enough. The reason the tort exists is to address the situation where some unlawful conduct (e.g. fraudulent statements) is directed against Party A, but the damage accrues to Party B in the form of a broken contract. In that scenario, Party B couldn’t sue for fraud, because the fraudulent statements were made to Party A. But Party A couldn’t sue for fraud, because it wasn’t harmed.

For example, if you think Party A and its customers are infringing your patent, you can threaten to sue the customers unless they use your product instead. That’s not tortious interference because suing someone for patent infringement isn’t itself wrongful.

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