Yes, a film about a children's doll possessed by the soul of a dead serial killer was reportedly based on a true incident. Not one about a demonic Teddy Ruxpin, though—the real-life inspiration behind Child's Play had to do with the voodoo ritual that brought that adorably maniacal Chucky doll to life in the first place.
When director/co-writer Don Mancini conceptualized Child's Play, his intentions, aside from making a twisted and original little horror flick, were to layer some commentary on the country's merchandising culture within a film in which a toy calls a kid's mother a "stupid bitch" and "filthy slut." How Chucky becomes animate, though, involves a bit of voodoo used to transfer the soul of murderer Charles Lee Ray (Brad Dourif) into the Good Guy doll's frame. And for that, Mancini reportedly took cues from the story of Robert Eugene Otto.
West was a painter and author living in Key West, Florida. In 1906, when Otto was 6-years-old, he received a present, "Robert the Doll," from a Bahamian servant who'd had issues with his family. Otto's family claimed that young Otto would have conversations with Robert, whenever the doll wasn't running around their house and laughing. Whether or not Robert called Otto's mother a "filthy slut" is unknown.