Emails from a top eBay Inc executive showed the Internet giant was aware that a competing online classifieds site it launched while sitting on the board of Craigslist was a sensitive issue to be handled delicately, according to court testimony on Tuesday.

EBay executives were told to feign surprise if Craigslist executives were to react negatively to news that eBay was launching its Kijiji classifieds site, one email showed.

The case surrounds eBay's minority stake in Craigslist, the largest U.S. online classifieds site. EBay sued Craigslist in Delaware in 2008, claiming the company diluted its stake from 28.4 percent to 24.85 percent, thereby denying eBay a seat on its board.

Craigslist then sued eBay in San Francisco, claiming that eBay used its board seat to glean confidential information that it then used to launch its own classifieds business.

Former EBay executive Josh Silverman, who once ran the company's international classifieds business and temporarily sat on the board of Craigslist in 2007, took the stand in a Delaware court on Tuesday, the second day of trial.

Emails presented during Silverman's cross examination pointed to an awareness among eBay executives that the launch of Kijiji could rattle Craigslist executives and compromise the relationship between the two companies.

When eBay was deciding whether to launch a U.S. classifieds site, executives distributed internal emails over the best strategy to inform Craigslist.

Craigslist's attorneys showed in court an email sent to Silverman in January 2007 from eBay's corporate counsel, Brian Levey, that suggested Levey take Silverman's seat on the Craigslist board to avoid any illusion of impropriety, given the imminent launch of Kijiji.

If we're going to compete, perhaps it's cleanest to have me be the board member since they'd have a much tougher time alleging that I'm using any confidential information to benefit our business, wrote Levey.

Right, that could be true. However I'd expect that we would lose our Board seat right away, no? responded Silverman, according to the email shown in court.

An email sent in January by Silverman to another eBay executive revealed Silverman's hesitancy to announce the launch of Kijiji without first informing Craigslist.

Do you have any more clarity around timing for making a decision on a US entry into classified? read the email. I wouldn't want to have a board meeting and then shortly after announce an entry. Would look strange.

LOW-KEY TONE

The court also saw an internal eBay email sent to Silverman that discussed whether it was best for eBay, when talking to Craigslist executives, to cast Kijiji as a competitor or complement to Craigslist.

EBay ultimately informed Craigslist Chief Executive Jim Buckmaster, in June 2007 of its decision to launch Kijiji.

Silverman summarized his June 19, 2007 phone call with Buckmaster informing him of the competing launch in an email titled Talking Points for Call.

I tried to present the information in a low-key and humble manner ('with 29 free classified sites out there, we're not saying that adding a 30th is going to have a huge impact, especially given what great traction CL has ...') read the email.

I'd recommend that we continue the low key tone where we don't expect them to be concerned or upset (and express surprise if they do) and see how that plays out, according to the email presented in court.

Silverman -- now the head of Web telephone company Skype, which eBay recently sold -- did not deny the authenticity of the emails presented in court.

In testimony, Silverman painted Craigslist as a company with a culture vastly different from that of eBay, and said Craigslist CEO Buckmaster and founder Craig Newmark did not appear to want eBay's input into its business.

Former eBay Chief Executive Meg Whitman took the stand on Monday, testifying that eBay was a good partner to Craigslist and denying that eBay had tried to steal secrets from the company.

Newmark and Buckmaster are expected to testify on Wednesday.

(Reporting by Alexandria Sage; Additional reporting by Thomas Hals; Editing by Richard Chang)

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