SYNOPSYS INC

We are subject to routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate outcome of any litigation is often uncertain and unfavorable outcomes could have a negative impact on our results of operations and financial condition. Regardless of outcome, litigation can have an adverse impact on Synopsys because of the defense costs, diversion of management resources and other factors.

We regularly review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount is estimable, we accrue a liability for the estimated loss. Legal proceedings are inherently uncertain and as circumstances change, it is possible that the amount of any accrued liability may increase, decrease or be eliminated.

Bell Semic Actions

On April 27, 2022, Bell Semiconductor LLC (Bell Semic), a patent monetization entity, began filing a series of patent infringement lawsuits and complaints with the U.S. International Trade Commission (ITC) against certain technology companies alleging that certain semiconductor devices designed using certain design tools offered by electronic design automation (EDA) vendors, including Synopsys, infringe upon one or more patents held by Bell Semic. Bell Semic sought money damages, attorneys’ fees and costs, and a permanent injunction prohibiting the defendants from using allegedly infringing EDA design tools. In the ITC investigations, Bell Semic sought limited exclusion orders preventing the respondents from importing into the United States semiconductor devices designed using certain design tools offered by EDA vendors, including Synopsys. In May 2023, Bell Semic filed motions to voluntarily withdraw the pending ITC investigations.

Synopsys was not named as a respondent or defendant in any of the aforementioned actions; however, certain of the respondents and defendants are Synopsys customers and sought defense and indemnity from Synopsys under their End User License Agreements in response to Bell Semic’s allegations. Synopsys defended some of its customers consistent with the terms of its End User License Agreement.

In November and December 2022, Synopsys and other EDA vendors filed actions for Declaratory Judgment of invalidity and/or non-infringement as to each of the six patents asserted by Bell Semic in the aforementioned actions. In December 2023, the Court granted Synopsys’ Motion for Summary Judgment of No Indirect Infringement of the Asserted Claims and stated it would entertain a motion for attorney fees. After the Court’s ruling, Bell Semic agreed to provide Synopsys with a license to the six patents at issue in the Declaratory Judgment case, as well as a license to additional patents in Bell Semic’s patent portfolio, at no cost to Synopsys. Bell Semic also agreed to dismiss its counterclaims in the Declaratory Judgment action, and its infringement claims against the customers Synopsys was defending, with prejudice. Those dismissals with prejudice have been entered by the various courts overseeing those actions, concluding the Bell Semic actions.