ALDN Aladdin Knowledge Systems Ltd (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

o

Rule 13d-1(b)

x

Rule 13d-1(c)

o

Rule 13d-1(d)

CUSIP No. M0392N101

1.

Names of Reporting Persons
Discovery Group I, LLC

2.

Check the Appropriate Box if a Member of a Group (See Instructions)                    Not Applicable

(a)

o

(b)

o

3.

SEC Use Only

4.

Citizenship or Place of Organization
Delaware

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With

5.

Sole Voting Power
None

6.

Shared Voting Power
740,587

7.

Sole Dispositive Power
None

8.

Shared Dispositive Power
740,587

9.

Aggregate Amount Beneficially Owned by Each Reporting Person
740,587

10.

Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions)  o

Not Applicable

11.

Percent of Class Represented by Amount in Row (9)
5.3%

12.

Type of Reporting Person (See Instructions)
OO

CUSIP No. M0392N101

1.

Names of Reporting Persons
Daniel J. Donoghue

2.

Check the Appropriate Box if a Member of a Group (See Instructions)                    Not Applicable

(a)

o

(b)

o

3.

SEC Use Only

4.

Citizenship or Place of Organization
U.S.A.

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With

5.

Sole Voting Power
None

6.

Shared Voting Power
740,587

7.

Sole Dispositive Power
None

8.

Shared Dispositive Power
740,587

9.

Aggregate Amount Beneficially Owned by Each Reporting Person
740,587

10.

Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions)  o

Not Applicable

11.

Percent of Class Represented by Amount in Row (9)
5.3%

12.

Type of Reporting Person (See Instructions)
IN

CUSIP No. M0392N101

1.

Names of Reporting Persons
Michael R. Murphy

2.

Check the Appropriate Box if a Member of a Group (See Instructions)                    Not Applicable

(a)

o

(b)

o

3.

SEC Use Only

4.

Citizenship or Place of Organization
U.S.A.

Number of
Shares
Beneficially
Owned by
Each
Reporting
Person With

5.

Sole Voting Power
None

6.

Shared Voting Power
740,587

7.

Sole Dispositive Power
None

8.

Shared Dispositive Power
740,587

9.

Aggregate Amount Beneficially Owned by Each Reporting Person
740,587

10.

Check if the Aggregate Amount in Row (9) Excludes Certain Shares (See Instructions)  o

Not Applicable

11.

Percent of Class Represented by Amount in Row (9)
5.3%

12.

Type of Reporting Person (See Instructions)
IN

Item 1.

(a)

Name of Issuer

Aladdin Knowledge Systems Ltd.

(b)

Address of Issuer’s Principal Executive Offices

35 Efal Street, Kiryat Arye, Petach Tikva 49511, Israel

Item 2.

(a)

Name of Person Filing

Discovery Group I, LLC (“ Discovery Group ”)
Daniel J. Donoghue, a Managing Member of Discovery Group
Michael R. Murphy, a Managing Member of Discovery Group

(b)

Address of Principal Business Office or, if none, Residence

Discovery Group, Mr. Donoghue, and Mr. Murphy are all located at:

191 North Wacker Drive, Suite 1685, Chicago, Illinois  60606

(c)

Citizenship

Discovery Group is a Delaware limited liability company
Mr. Donoghue and Mr. Murphy are U.S. citizens

(d)

Title of Class of Securities

Ordinary Shares, nominal value $.01 New Israeli Shekels per share

(e)

CUSIP Number

M0392N101

Item 3.

If this statement is filed pursuant to §§240.13d-1(b) or 240.13d-2(b) or (c), check whether the person filing is a:

Not Applicable

(a)

o

Broker or dealer registered under section 15 of the Act (15 U.S.C. 78o).

(b)

o

Bank as defined in section 3(a)(6) of the Act (15 U.S.C. 78c).

(c)

o

Insurance company as defined in section 3(a)(19) of the Act (15 U.S.C. 78c).

(d)

o

Investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C 80a-8).

(e)

o

An investment adviser in accordance with §240.13d-1(b)(1)(ii)(E);

(f)

o

An employee benefit plan or endowment fund in accordance with §240.13d-1(b)(1)(ii)(F);

(g)

o

A parent holding company or control person in accordance with § 240.13d-1(b)(1)(ii)(G);

(h)

o

A savings associations as defined in Section 3(b) of the Federal Deposit Insurance Act (12 U.S.C. 1813);

(i)

o

A church plan that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940 (15 U.S.C. 80a-3);

(j)

o

Group, in accordance with §240.13d-1(b)(1)(ii)(J).

Item 4.

Ownership

Provide the following information regarding the aggregate number and percentage of the class of securities of the issuer identified in Item 1.

(a)

Amount beneficially owned:

Discovery Group — 740,587
Mr. Donoghue — 740,587
Mr. Murphy — 740,587

(b)

Percent of class:

Discovery Group — 5.3%
Mr. Donoghue — 5.3%
Mr. Murphy — 5.3%

The foregoing percentages are based on 13,884,856 shares of Ordinary Shares of the Issuer identified in Item 1 outstanding as of June 30, 2008, as reported in the Schedule 13D filed by Jasmine Holdco LLC, Vector Capital III, L.P., Vector Entrepreneur Fund III, L.P., Vector Capital IV, L.P., Vector Capital Partners III, L.L.C., Vector Capital Partners IV, L.L.C., and Alexander R. Slusky on August 7, 2008 based on information provided by the Issuer on July 22, 2008.  Note: as reported in the Issuer’s most recent Annual Report on Form 20-F for the year ended December 31, 2007, there were 14,786,187 shares of Ordinary Shares outstanding as of December 31, 2007 .

(c)

Number of shares as to which the person has:

(i)

Sole power to vote or to direct the vote

None

(ii)

Shared power to vote or to direct the vote

Discovery Group — 740,857
Mr. Donoghue — 740,857
Mr. Murphy — 740,857

(iii)

Sole power to dispose or to direct the disposition of

None

(iv)

Shared power to dispose or to direct the disposition of

Discovery Group — 740,857
Mr. Donoghue — 740,857
Mr. Murphy — 740,857

Item 5.

Ownership of Five Percent or Less of a Class

If this statement is being filed to report the fact that as of the date hereof the reporting person has ceased to be the beneficial owner of more than five percent of the class of securities, check the following   o .

Not Applicable

Item 6.

Ownership of More than Five Percent on Behalf of Another Person

The shares reported herein have been acquired on behalf of discretionary clients of Discovery Group.  Such discretionary clients are entitled to receive all dividends from, and proceeds from the sale of, those shares.  None of those discretionary clients, to the knowledge of Discovery Group, Mr. Donoghue or Mr. Murphy, has an economic interest in more than 5% of the class.

Item 7.

Identification and Classification of the Subsidiary Which Acquired the Security Being Reported on By the Parent Holding Company or Control Person

Not Applicable

Item 8.

Identification and Classification of Members of the Group

Not Applicable

Item 9.

Notice of Dissolution of Group

Not Applicable

Item 10.

Certification

By signing below I certify that, to the best of my knowledge and belief, the securities referred to above were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose or effect.

January 12, 2009

Date

DISCOVERY GROUP I, LLC

Michael R. Murphy*

Signature

Michael R. Murphy, Managing Member

Name/Title

Daniel J. Donoghue*

Signature

Daniel J. Donoghue

Name/Title

Michael R. Murphy*

Signature

Michael R. Murphy

Name/Title

*By: /s/ Mark Buckley

Mark Buckley
Attorney-in-Fact for Daniel J. Donoghue
Attorney-in-Fact for Michael R. Murphy

Exhibit 1

Joint Filing Agreement dated as of January 12, 2009, by and among Discovery Group I, LLC; Daniel J. Donoghue; and Michael R. Murphy.

Exhibit 2

Power of Attorney of Daniel J. Donoghue, dated as of April 28, 2008.

Exhibit 3

Power of Attorney of Michael R. Murphy, dated as of April 28, 2008.