Facebook Adds IBM Patents to Its Defenses

NEW YORK ( Trefis) -- Facebook has been in the news a lot in the last couple of months.

It is preparing to go public, in what would be one of the biggest Internet IPOs of all time. At the same time, it has been targeted by Yahoo! ( YHOO) with patent infringement lawsuits.

It has also been sued by a Canadian IT company and could possibly be sued by AOL ( AOL) soon.

Check out our complete analysis of Facebook.

Facebook's Patent Purchases Will Help Ward Off Lawsuits

Because Facebook is a relatively young company, it hardly has any significant patents to protect itself.

Currently it has just 56 issued patents and about 503 patent applications in the U.S. In order to strengthen its defenses against patent litigation, Facebook has acquired more than 750 patents from IBM ( IBM), which should presumably help it countersue the companies gunning for it, and enter cross licensing agreements instead of paying settlement fees or damages to them.

IBM has done such patent deals in the past, selling around 1,000 patents to Google ( GOOG) in 2010 to help Google defend itself and its Android device partners against lawsuits.

We currently have a $74 billion valuation for Facebook based on the discounted cash flow valuation of its advertising and virtual good transactions businesses. It is expected to raise more than $5 billion at a $100 billion valuation in its upcoming IPO.

Click here to find out how a company's products impact its stock price at Trefis

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.