Settlement Agreement Affirms Aladdin's
Rights Over USB Token Patent

Distributor for Feitian Technologies Co., Ltd. signs settlement agreement with Aladdin Knowledge Systems and agrees to pay royalties

NEW YORK and TEL AVIV, ISRAEL, June 29, 2005 - Aladdin Knowledge Systems, Inc. (Nasdaq:ALDN) a global provider of Software Digital Rights Management (DRM) and Enterprise Security solutions, today announced a favorable settlement in its campaign to enforce its rights on patents relating to USB devices that store personal identification credentials.

On March 11, 2005, Aladdin filed a complaint against Feitian Technologies Co., Ltd. and its distributors in the United States District Court for the District of Delaware to enforce its rights on patents 6,748,541 and 6,763,399. Recently, a distributor of China–based Feitian Technologies Co., Ltd. signed a settlement agreement with Aladdin agreeing not to import, distribute, sell, or offer infringing products. The distributor also agreed to pay royalties to Aladdin for infringing products sold.

USB-based authentication devices such Aladdin's eToken have received significant attention recently as a growing number of financial institutions have adopted the technology in their on-going battle against unauthorized access, phishing, and the theft of confidential customer data. The devices provide a simple and reliable method for users' identities to be verified by the eToken issuer. The devices also provide for the secure transfer of sensitive data providing an additional layer of security.

Patent 6,748,541, granted on June 8th, 2004, covers a method of using any portable or mobile device (USB/ Serial/ PS2, etc.) in order to store unique personal information or credentials in general, which can than be used for authenticating to a network or application. Patent 6,763,399, granted on July 13th, 2004, covers portable devices or tokens featuring an on-board smartcard chip that communicates with a host through a USB port. Both patents support the award-winning Aladdin eToken two-factor authentication solution.

"Aladdin will continue to strengthen its technology development and protect its portfolio of patents and intellectual property," said Yanki Margalit, Chief Executive Officer of Aladdin Knowledge Systems. "As the leader within the worldwide USB-based authentication token market, Aladdin is pleased by this settlement agreement -- underscoring the fast-growing adoption of our Aladdin eToken authentication solution."

About eToken

Aladdin eToken provides cost-effective strong user authentication and password management solutions. It provides enhanced security and ensures safe information access; improved password and ID management; and secure mobility of digital credentials/certificates and keys.

About the size of an average house key, the award-winning Aladdin eToken is easy to use and highly portable, providing users with powerful authentication by requiring something they have, the tamper-proof eToken, and something they know, a PIN. It is used for secure network logon, secure VPN, Web Sign-On, Simple Sign-On, secure email, and numerous other applications. eToken is available in smart card and USB form factors featuring proximity capabilities and one-time password technology.

The Aladdin Token Management System (TMS) enables the deployment, provisioning and maintenance of security Tokens, Smartcards and ID Badges within an organization. In addition, TMS offers seamless, and reliable management for Enterprise security services combining both PKI and non-PKI systems. For more information, visit http://www.Aladdin.com/eToken.

About Aladdin Knowledge Systems

Aladdin (Nasdaq:ALDN) is a global provider of security solutions that reduce software theft, authenticate network users and protect against unwanted Internet and e-mail content, including spam and viruses. Its security products are organized into two segments: Software Digital Rights Management (DRM) and Enterprise Security. Aladdin's Software DRM products allow software publishers to limit revenue loss from software theft and piracy. Its Enterprise Security solutions enable organizations to secure their information technology assets by controlling who has access to their networks (authentication) and what content their users can utilize (content security). Visit the Aladdin Web site at www.Aladdin.com.

©2007 Aladdin Knowledge Systems, Ltd. All rights reserved. eToken, Aladdin Knowledge Systems and the Aladdin logo are trademarks or registered trademarks of Aladdin Knowledge Systems, Ltd. All other product and brand names mentioned in this document are trademarks or registered trademarks of their respective owners.

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