As others noted, the appropriate adult thanked her (the child's parent, her own niece) and I hope the son thanked her too, if he's old enough.
I wonder: Does this SIL tend to be sensitive, think she's not appreciated, claim that she is somehow politer or more thoughtful than others, or is she generally touchy or one who tends to want to throw the spotlight back onto herself, even over little things at times? If so: That's who she is, and this is a small example that is almost predictable, so totally ignore it. Her "upset" will move on to being upset about, oh, something else.
If she is NOT like that, and this seems out of character or just unusually touchy, and you and she usually get along: Chalk it up to her maybe having bad day the day she decided to be offended. And if you and she are usually on good terms, just say, "Hey, Billy really liked the (thing) and DIL says he plays with it a lot. That was nice of you, thanks." Do not mention that you heard -- second-hand, not from her directly, right? -- that she was mad. Just bring it up casually. If she goes off on you, well, bigger issue there, but you will have acknowledged the gift.She might actually be upset about something utterly unrelated and might not be truly upset with YOU at all, but transferring her feelings about something else onto this nonexistent "offense." Don't overtalk it and don't overthink it either.