The puppeteer has been developing the project since this past summer, and would have featured a new character. Here's a brief description of the story, as described in a leaked development document.
In other words, it sounds like a different version of this year's hit summer comedy Ted. It isn't known if the now-dead project was going to be shot entirely in live-action or if it would have featured CGI animation. The unnamed lead character was reportedly inspired by the WB's Ralph Phillips, who appeared in a series of 1950s Looney Tunes short films.
Dan Lin and Roy Lee were both attached to produce, although it isn't clear if they are still involved, or if Kevin Clash plans on shopping the project around to another studio.