The US Military's demand that the product they purchase is able to be used for all lawful purposes seems pretty reasonable, and is really the only valid line to draw. Forcing one's own ethics onto the military's use of your product is nonsensical on its face.
The right response is to not use the said product and use something else. If i want your widget to do something I want and you refuse, I don't get to smash your shop.
It is completely normal to have ethics based conditions like that. It already eciats - drugs that can not be used in execution or elements that cant be used in arms
Goverment is being super unreasonable here. And tyrannical too, companies dont have duty to provide unreliable arms for illegal war.
If I produce and sell widgets in my widget shop, then nobody but me gets to decide how I make those widgets.
The government can come into my shop and order sixty thousand widgets built exactly the way they say they want them built, and it may be something that doesn't run afoul of any laws at all.
But that doesn't mean that I am required or compelled to build widgets their way -- or at all.
I'm free to tell them to fuck off.
The government can then find go someone else to build widgets to their specifications (or not; that's very distinctly not my problem).