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The name "Teddy," is in reference to Theodore Roosevelt. While on a hunting trip in Mississippi in November of 1902, President Theodore Roosevelt along with several other hunters were competing. Roosevelt's attendants cornered, clubbed and tied an American Black Bear to a willow tree. Roosevelt was encouraged to shoot it, but he refused, saying it was "unsportsmanlike," and told the others to kill the bear to put it out of it's misery. This event inspired many political cartoon depictions drawn by Clifford Berryman.

Morris Michtom was inspired to create a new toy after seeing a drawing of Roosevelt and a bear cub. After creating a stuffed bear cub, he sent one to Roosevelt and received permission to sell them. Afterwards, Michtom founded the Ideal Novelty and Toy Co. Around the same time, the Steiff firm in Germany created a stuffed bear inspired by Richard Steiff's designs. The toys were exhibited at the Leipzig Toy Fair in March of 1903 and the company exported 3000 to the United States. Interest in teddy bears had grown rapidly by 1906.

Teddy bears are primarily created as toys for children. Rigid requirements must be met to market bears to children in the US and Europe.

Teddy bears are often used in video games to symbolize innocence in a character, or to imply the presence of children.

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