Item 3. Legal Proceedings

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.

Hungarian Tax Matter

See Note 15. Income Taxes of the Notes to Consolidated Financial Statements in this Annual Report for a discussion of our Hungary audit under the heading "Non-U.S. Examinations."

Bell Semic Actions

On April 27, 2022, Bell Semiconductor LLC (Bell Semic), a patent monetization entity, began filing a series of patent infringement lawsuits 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 seeks money damages, attorneys' fees and costs, and a permanent injunction prohibiting the defendants from using allegedly infringing EDA design tools.

On April 29, 2022, Bell Semic also began filing a series of complaints with the U.S. International Trade Commission (ITC) alleging violations of Section 337 of the Tariff Act of 1930 and seeking 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, and cease-and-desist orders prohibiting respondents from importing, selling, offering for sale, advertising, or transferring products made using certain design tools offered by EDA vendors, including Synopsys. On November 8, 2022, the ITC instituted the investigations. On May 8, 2023, Bell Semic filed motions to voluntarily withdraw the pending ITC investigations.

Synopsys is not named as a respondent or defendant in any of the aforementioned actions; however, certain of the respondents and defendants are Synopsys customers and have sought defense and indemnity from Synopsys under their End User License Agreements in response to Bell Semic's allegations. Synopsys is defending 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. Bell Semic's motion to dismiss the Declaratory Judgment actions was denied on April 27, 2023. Synopsys and other EDA vendors also filed Motions for Preliminary Injunction seeking to enjoin Bell Semic from proceeding with the ITC investigations and patent infringement lawsuits. The Motions for Preliminary Injunction were denied without prejudice on April 27, 2023. Bell Semic responded to the Declaratory Judgment complaint on May 11, 2023, asserting counterclaims for patent infringement against the EDA vendors. On December 6, the Court granted Synopsys' Motion for Summary Judgment of No Indirect Infringement of the Asserted Claims and stated it would entertain a motion for attorneys fees. The other EDA vendors settled with Bell Semic. The actions for Declaratory Judgment is set for trial on January 16, 2024.