Patriot Scientific Corporation Provides Update

It has been over one year since we filed an action in the Superior Court of the State of California, County of Santa Clara against Innovation Properties Limited, LLC, the Company's fellow member in Phoenix Digital Solutions, LLC, concerning the management of the MMP(TM) portfolio of microprocessor patents, and Alliacense, LLC, the licensing division of TPL. This First Amended Complaint presents allegations against TPL for breach of contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, contract interference, constructive fraud, and unjust enrichment, during also seeking declaratory relief over specific contractual disagreements and injunctive relief over activities related to the simultaneous marketing and negotiating of MMP and non-MMP portfolio licenses. The Complaint furthermore seeks an accounting of earnings and expenses charged to the PDS joint venture, while as well alleging that TPL engaged in "mixed" licensing activities designed to profit TPL at the expense of the interests of PDS and Patriot.

During much of the intervening time between the filing of our Complaint and now, we have made exhaustive and tireless efforts through discussions with TPL in an attempt to resolve these issues. We have held firm to the belief that the actions by TPL leading to our filing the Complaint require measures to prevent any inappropriate "mixed" licensing. For much of these discussions TPL was unwilling to provide Patriot approval rights over MMP licenses entered into, a position we believed to be wholly unreasonable and indicative of an intention to act in a manner in other words potentially contrary to 1) the interests of Patriot and our stockholders and 2) a properly managed joint venture. We believe the licensing of MMP and non-MMP Portfolios creates an inherent conflict of interest, and that TPL has promoted the non-MMP portfolios in a manner that inappropriately diverts resources and earnings. Fortunately we were granted some control over these activities as a result of the Court's issuance of a Temporary Restraining Order. The TRO, which subsequently became a Preliminary Injunction by agreement with TPL, requires Patriot receive advance notice of licensing terms and provides Patriot with a mechanism to approach the Court over unacceptable licenses previously they are executed. Through our settlement discussions, we have consistently sought a permanent solution to the situation.

Update on our wholly owned subsidiary

We as well wanted to take this possibility to provide an update on our wholly owned subsidiary, Patriot Data Solutions Group, Inc.. We have been cautiously optimistic about PDSG's future as an integral part of environments requiring standards based information sharing. Our approach has been to nurture the business during carefully evaluating our level of ongoing support within the context of the revenue generating opportunities we see developing. During we have observed increased indications of standards based information sharing being embraced by the public safety and justice communities, this market has not developed at the rate we had hoped. And while we have been pleased by opportunities won through some of our go-to-market partners, we have been disappointed by the overall lack of inroads and productivity achieved. While the better part of this calendar year we had been in discussions with a prospective joint venture partner in pursuit of a mechanism to furthermore develop business, while sharing some of the future risks and rewards. While this specific venture did not come to fruition, we are continuing to assess strategic alternatives for the future of PDSG in parallel with our current approach of carefully measured support.

The MMP Portfolio patents, filed by The TPL Group in the 1980s, include seven US patents as then as their European and Japanese counterparts, cover techniques that enable higher performance and lower cost designs essential to consumer and commercial digital systems ranging from PCs, cell phones and portable music players to communications infrastructure, medical equipment and automobiles. The MMP Portfolio patents were co-invented by Charles H. Moore who is known for various contributions to computer chip and micro-processor technologies and design tools.