Hello Kitty may be the most famous Sanrio personality, but she is not the only character in the franchise worthy of recognition. Her array of friends includes Chococat, Kuromi, My Melody, Tuxedo Sam, Pompompurin, Keroppi, and a host of countless others that are less well-known.
Since the Sanrio company was established in 1960, there has been plenty of time for Hello Kitty's group of friends to expand, but not every new Sanrio character became a long-term part of the franchise. One adorable personality in particular was eliminated from Sanrio's line-up very rapidly due to some legal issues, never to be seen again.
Cathy, Hello Kitty's Bunny Pal, Was Not a Long-Term Sanrio Character
She Only Existed Between the 1970s and 1990s, After Which She Was Erased From Sanrio's History
Cathy, sometimes spelled Kathy, was Sanrio's take on a rabbit character. Many Sanrio characters represent real-life animals; Hello Kitty looks like a cat, although she is technically a human, Pompompurin is a golden retriever, Tuxedo Sam is a blue penguin, and Keroppi is a frog, for example. Cathy's design appears strikingly similar to Hello Kitty's with white fur, eyes, and a nose but no mouth, a simple outfit, and a distinguishing pink hair bow on one of her pointed rabbit ears.

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Cathy is a forgotten Sanrio character who many fans are not even aware of, and thus, her origins are shrouded in mystery, too. She Sanrio's most successful characters yet, but sadly, tricky legal disputes dashed Cathy's chances of becoming Sanrio's new star.
Fans Compared Sanrio's Cathy to Another Popular Bunny Character, Miffy
Dick Bruna, the Designer of Another Popular Fictional Bunny, Miffy, Took Issue With Cathy
Intriguingly, Cathy was brought to life long before Hello Kitty, but despite this, Cathy would unfortunately be removed from all Sanrio merchandise years later. Cathy's appearance and name underwent many changes throughout the years as Sanrio continually tweaked her design and characterization to better appeal to audiences. She was known as Little Honey initially, then Cathy, then finally, Daisy. The colors of her look changed from yellow and orange, to pink, and then back to yellow and orange.

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Although Sanrio worked hard to differentiate Cathy from other anthropomorphic animal characters in pop culture, Dick Bruna, the creator of another famous rabbit character, took issue with Cathy. Dick Bruna created Miffy, a white rabbit with an x-shaped nose who is often depicted wearing a blue or an orange dress. Both Miffy and Cathy are white bunnies with fairly simplistic designs, so Mercis Media, the company Bruna was a part of, filed a lawsuit against Sanrio and Cathy, attempting to get the character wiped from existence due to copyright infringement claims.
All Mentions of Cathy Have Been Wiped From Sanrio’s Website and Merchandise
Sanrio Took the Court Ruling Seriously and Completely Removed Cathy From Their Brand Forever
Between 2010 and 2011, Mercis Media and Sanrio disputed whether Cathy was too similar to Miffy in court, and ultimately, the ruling indicated that Cathy did appear too much like Bruna's character. Sanrio did not take this accusation lightly and counter-sued, but their efforts were futile and, ultimately, the company agreed to stop using Cathy's likeness, or else pay hefty fees every time Cathy appeared in Sanrio merchandise or shows. Sanrio would have faced daily fines of up to 25,000 yen had they continued using Cathy in their content.

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At the end of the court proceedings, Mercis Media and Sanrio both donated to an earthquake disaster relief fund, settled out of court, and dropped the issue, since Sanrio promised to remove Cathy from their characters. In places where Cathy was present, like in old television shows, she is often traced over or deleted entirely. Even years after this argument, Sanrio makes no mention of Cathy on their website or in official creations of the brand. Ultimately, Sanrio treats Hello Kitty's friend Cathy as if she never existed, lest they deal with another legal dispute.
Source: Hello Kitty Wiki

Hello Kitty
Hello Kitty is a globally recognized character created by Yuko Shimizu in 1974 for Sanrio. Initially designed for children, its popularity expanded to teens and adults, becoming a major part of kawaii culture. Depicted as a friendly, anthropomorphic cat from London, Hello Kitty has appeared in numerous animated series, comics, films, and video games. The brand is known for extensive merchandising, with over 50,000 products worldwide.