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CORRESP
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    virnetx_corresp-090609.htm

                ORRICK,
      HERRINGTON & SUTCLIFFE LLP

                1000
      Marsh Road

                Menlo
      Park, CA  94025

                tel  650-614-7400

                fax  650-614-7401

                www.orrick.com

              November 6,
      2009

                Lowell
      D. Ness

                (650)
      614-7455

                lness@orrick.com

    Barbara
C. Jacobs

    Assistant
Director

    Securities
and Exchange Commission (Mail Stop 4561)

    100 F
Street, N.E.

    Washington,
D.C. 20549

              Re:

              VirnetX
      Holding Corporation (the “Company”)

              Registration
      Statement on Form S-3 (the “Registration
      Statement”)

              Filed
      September 25, 2009

            File
      No. 333-162145

    Dear Ms.
Jacobs,

    Please
find, as set forth below, the Company’s responses to the comment letter of the
staff of the Securities and Exchange Commission (the “Staff”) dated October
23, 2009 (the “Staff
Letter”).  Concurrent with delivering this letter, the Company
has filed Amendment No. 1 to the Registration Statement (the “Amendment No. 1”) on
EDGAR.  For the Staff’s convenience, the Staff’s comments from the
Staff Letter are set forth in italics before each response. We will also
provide you, under separate cover, with a marked copy of Amendment No.
1 showing all changes from made the previously filed version.

    General

    1.         We
refer to our comment letter dated October 13, 2009 relating to your
application requesting confidential treatment of certain portions of
Exhibit 10.1 to your Form 10-Q for fiscal quarter ended June 30,
2009, and note that we have received your written response dated
October 22, 2009.  Please be advised that your registration
statement will not be declared effective until all issues relating to your
confidential treatment request have been resolved.

    The
Company has separately responded to the Staff’s initial comment letter with
respect to such application and will respond to any additional comments on the
Company’s application promptly.

    2.         We
note that you identify yourself as a smaller reporting company on the cover page
of your Form 10 K for the fiscal year ended on December 31, 2008, which you
filed on March 31, 2009.  We note further that the aggregate market
value of the voting and non voting common equity held by your non affiliates as
of the last date of your second fiscal quarter in 2008 exceeded $123
million.  Please provide us with your analysis as to whether your
company qualified as an accelerated filer at the end of your last fiscal
year.  Further, please address in your analysis whether your Form 10 K
was filed timely.  Refer to Rule 12b 2 under the Exchange Act.,
Section III.E.1.d of SEC Release No. 33 8876 and Question 130.04 under our
Exchange Act Rules Compliance and Disclosure Interpretations, available on our
web site.

      November
6, 2009

      VirnetX
Holding Corporation

      Page
2

    The
Company respectfully submits that it continues to believe that it was not an
accelerated filer with respect to its Form 10-K for the fiscal year ended
December 31, 2008 (the “2008 10-K”) and, as a
result, the Company believes that its 2008 10-K was timely filed.

    As set
forth in Rule 12b-2 of the Exchange Act of 1934, as amended (the “Rule”):

              1.

              The
      term "accelerated filer" means an issuer after it first meets the
      following conditions as of the end of its fiscal
  year:

              i.

              The
      issuer had an aggregate worldwide market value of the voting and
      non-voting common equity held by its non-affiliates of $75 million or
      more, but less than $700 million, as of the last business day of the
      issuer's most recently completed second fiscal
  quarter;

              ii.

              The
      issuer has been subject to the requirements of section 13(a) or 15(d) of
      the Act for a period of at least twelve calendar
  months;

              iii.

              The
      issuer has filed at least one annual report pursuant to section 13(a) or
      15(d) of the Act; and

              iv.

              The issuer is not eligible to use the requirements
      for smaller reporting companies in Part 229 of this chapter for its annual
      and quarterly reports. [emphasis
added]

    Although
the Company had a public float in excess of $75 million on June 30, 2008, it
continued to be eligible to use the requirements for smaller reporting companies
in its 2008 10-K.  On its face, the Rule unambiguously makes it
impossible for an issuer to be an accelerated filer if at the end of its fiscal
year it is eligible to use the requirements for smaller reporting
companies.  Moreover, Form 10-K itself requires the issuer to check
only one box, further clarifying the mutually exclusive nature of an issuer’s
status as either an accelerated filer or a smaller reporting
company.  In addition, the Company respectfully notes that it would be
confusing to investors if an issuer were to check the box “accelerated filer”
while providing only the reduced disclosure of a smaller reporting company, or
alternatively, attempted to check more than one box in contravention of the
instructions to the form.

    In the
Commission’s adopting release No. 33-8876 (January 4, 2008) (the “Release”), the
Commission notes again and again that the final rule was designed to harmonize
the smaller reporting company rules with accelerated filer rules to provide
greater clarity and simplicity for issuers and investors.  In fact,
one of the three stated objectives of the Release was “reducing unnecessary
complexity in our regulations by combining the category of “small business
issuers” with the category of “non-accelerated filers” to the extent
feasible.”  The Release goes on to say that one of the effects of the
new rule was to:  “Combine elements relating to the accelerated filer
definition with qualifying standards for the smaller reporting company
determination and transition provisions to promote uniformity and consistency
with current regulations and, therefore, simplify
regulation.”  Footnote 34 to the Release states:  “The
entering and exiting rules in the smaller reporting company system are modeled
after the method of determining accelerated filer status set forth in Rule
12b-2.”   Elsewhere, the Release notes that:  “Many of
the comment letters in favor of our proposed definition of “smaller reporting
company” agreed that combining the categories of non-accelerated filers with
small business issuers for purposes of the definition provided a convenient and
simple approach because it tracks the accelerated filer definition and reduces
regulatory complexity.”  Significantly, the Release also
states:  “We are adopting transition rules for entering and exiting
smaller reporting company status that track the accelerated
filer

      November
6, 2009

      VirnetX
Holding Corporation

      Page
3

    definition.”  [emphasis
added]  The Release points out:  “One comment letter
requested clarification, pointing out that accelerated filers are required to
change to their new status when determining the due date of the annual report
covering the year of the status change, but, as proposed, the smaller reporting
company determination would not take effect until the first fiscal quarter of
the next fiscal year.”  In response to such comment letter, the
Release offers the following clarification:  “As adopted [the final
release provides that a] smaller reporting company required to transition to the
larger reporting system after its determination date calculation will not be
required to satisfy the larger reporting company disclosure requirements until
the first quarter after the determination date fiscal
year.”   Thus, it is precisely in response to the supposed
inconsistency with the accelerated filer rules that the Commission clarified the
timing for transitioning to the smaller reporting company rules.  In
light of the number of times the Release mentions harmonization with the
accelerated filer rules, the Company respectfully points out that there is
simply no room to contend that there is a remaining unintended conflict between
the accelerated filer transition rules and the smaller reporting company
transition rules such that an issuer might technically fall within both
definitions with respect to it’s 2008 10-K.  In addition, the Company
respectfully points out the well established rule of statutory construction that
a more specific provision adopted later in time should be given precedence over
a more general provision.  The accelerated filer rules apply generally
to describe when a company transitions in and out of accelerated filer status,
whereas the later adopted smaller reporting company amendment, as described in
the Release, provides a very specific result for the situation of a company
transitioning from smaller reporting status to accelerated filer
status.  Taken together with the unambiguous nature of the Rule
itself, the Release provides abundant clarification that 1) a smaller reporting
company maintains such status until the first 10-Q after the fiscal year of the
status change, and 2) this very specific exception to the general accelerated
filer rules was completely intentional.

    In the
Commission’s January 25, 2008 “Changeover to the SEC’s New Smaller Reporting
Company System by Small Business and Non-Accelerated Filer Companies – A Small
Entity Compliance Guide” (the “Guide”), the
Commission repeats its illustration of when a transitioning smaller reporting
company needs to “start filing disclosure based on the non-scaled Regulation S-K
item requirements,” and states that “the issuer needs to begin providing
non-scaled, larger company disclosure in the quarterly report for the first
fiscal quarter following the fiscal year of the public float determination
date.”  The Guide provides an example of this transition with no
mention of the “odd” result that would be the case if an issuer could
technically be both an accelerated filer and a smaller reporting company with
respect to a particular report to be filed.

    The
Company also respectfully points out that the Release and the Guide expressly
contradict Question 130.04 under the Staff’s Exchange Act Rules Compliance and
Disclosure Interpretations (the “CD&I”) unless the
term “disclosure requirements” is read to exclude the disclosure requirement
with respect to timing of filing the disclosure.  The Release and the
Guide expressly state that the issuer transitions into the smaller reporting
company “disclosure requirements” or “disclosure system” with the first 10-Q
after the fiscal year end, not the 10-K.  Neither the Release nor the
Guide specifically addresses whether the term “disclosure requirements” or
“disclosure system” includes or excludes the disclosure timing
requirements.  In other publications of the Commission, however, the
Commission has referred to the timing of disclosure as a part of a disclosure
system.  For example, in SEC
Release No. 33-6239 (September 4, 1980),

      November
6, 2009

      VirnetX
Holding Corporation

      Page
4

    the
release states that “a person who triggers the elements of Rule 14e-3(a)
discussed above may either refrain from trading in the securities specified or
comply with the disclosure requirement of Rule 14e-3(a).  The
disclosure requirement has two elements: (1) timing of disclosure and (2) the
information and its source.”  In addition, in the Commission’s 2006
release entitled “SEC Votes to Adopt Changes to Disclosure Requirements
Concerning Executive Compensation and Related Matters,” the SEC outlines seven
areas where it had adopted changes to disclosure requirements concerning
executive compensation.  The seventh area of discussion was entitled
“Compliance” and included compliance deadlines with respect to the new
provisions.  The Company notes that the Release does refer to the
timing of the filing of the 10-Q for the transitioning smaller reporting company
in its discussion of the smaller company reporting “disclosure system,” in an
implicit acknowledgment that disclosure timing is an integral component of the
broader term “disclosure system.”  It is natural for a practitioner
and a lay person to assume that when the Commission refers to the term
“disclosure system” and “disclosure requirements,” those terms clearly include
the timing requirements associated with the disclosure.  Accordingly,
the Company respectfully points out that when the Commission repeats in several
releases that a transitioning company will transition to scaled disclosure
requirements on a certain schedule, an issuer should be entitled to assume that
it may time its filings in accordance with such a system.

    The
CD&I makes several conclusory statements to the effect that the accelerated
filer rules were not changed.  The Company respectfully
disagrees.  On its face, the only possible interpretation of the
Rule’s definition of “accelerated filer” unambiguously makes it impossible for a
filer to be both an accelerated filer and a smaller reporting
company.  The Release and Guide confirm this interpretation, as does
Form 10-K which only permits one box to be checked.

    The
timing of the posting of the CD&I is also problematic for issuers with
respect to the 2008 10-K.  During the week of June 30, 2008 (the
relevant measurement date for this purpose), the Company conducted its analysis
and concluded that it would need to transition to accelerated filer status since
the aggregate market value of the voting and non-voting common equity held by
the Company’s non-affiliates exceeded $123 million.   On that
date, the Staff had not yet posted Question 130.04 in the CD&I, which was in
fact posted several months later on September 30, 2008.  The Company
evaluated the transition guidelines provided in Rule 12b-2 and the guidance
given by the Commission in the Release, the Guide, and other Commission guidance
available at that time, and determined that the Company would first file as an
accelerated filer with its Form 10-Q for the quarter ended March 30,
2009.  The Company prepared and performed in accordance with a
disclosure schedule for the 2008 10-K and first quarter 2009 10-Q on that
basis.

    The
Company acknowledges that Question 130.04 apparently concludes that it is
possible to be both an accelerated filer as well as a smaller reporting company
for a given 10-K, but the Company respectfully submits that the CD&I
attempts to resolve a conflict that does not exist.  Moreover, to the
extent the CD&I purports to change the plain meaning of the Rule, the
Release and the Guide, the Company respectfully points out that the CD&I is
not itself sufficient to clarify the matter in that it does not indicate what
box or boxes should be checked on the Form 10-K and how this inconsistency
should be handled to mitigate investor confusion.  In light of the
fact that it was posted after the measurement date for the 2008 10-K and
purports to clarify a matter the Company believed to be unambiguous at the time
of its analysis, the Company respectfully suggests that, in any event, it would
be inappropriate to apply the interpretation described in Question 130.04 to the
Company’s 2008 10-K.

      November
6, 2009

      VirnetX
Holding Corporation

      Page
5

    The
Company also respectfully notes that the legal status of CD&I is such that
an issuer cannot rely on CD&I particularly in the face of what it believes
to be contrary interpretations set forth in the Rule and Release, both of which
have a legal status that trumps the CD&I.  As noted in the lead in
to the CD&I, “the interpretations presented below reflect the views of the
staff of the Division of Corporation Finance.  They are not rules,
regulations, or statements