Well, sorry to tell you this, but...
That's a broken eInk glass substrate.
There is no way to fix other than buy a new reader. This is a hardware fault that can not possibly be caused by software but is the result of application of an external force...
The sleeping cat is one of the sample images that comes with this mod, it's fully displayed [supposed to look like that, sitting in one screen corner, not scaled to full screen size for HD readers] so assuming the mod was installed and working correctly, something broke your display while the device was in sleep mode and the cat just happened to get stuck in the broken part.
I only mention this in case it helps you narrow down the time of incident / possible culprits (maybe a real life cat?)
https://www.mobileread.com/forums/at...1&d=1490720327
https://openclipart.org/detail/233801/sleeping-kitty