From the Super Mario Wiki
The Caged "Bird" is a key item in Paper Mario: Color Splash. After Mario places down the Birdcage just outside Dark Bloo Inn, a Koopa Paratroopa flies into it and Mario can pick it up again. Mario must then return the cage to the Ghost Toad in room 303. The Ghost Toad puts the cage on the table, and then he leaves to go to the tea party. If Mario speaks to the Koopa Paratroopa in the cage, he complains about being called a bird.