China Social Sciences Press (CSSP) released a translation of Beatrix Potter's classic Tale of Peter Rabbit in April.
But it has been blocked from distributing it by the Chinese Government after the story's UK publisher, Frederick Warne Ltd, complained.
Frederick Warne claims it own the international rights, but CSSP says it obtained the legal rights from the Chinese translator.
Legal challenge
The Chinese State Administration for Industry and Commerce banned the publisher from distributing 20,000 copies of the book.
CSSP, which has launched a legal challenge against the ban, also says Frederick Warne's copyright ran out in 1993.
Under Chinese law, copyright applies for 50 years after an author's death. Potter died in 1943.
Zhang Zaiping, a Beijing trademark consultant acting for Warne, said: "The trademarks for both the Chinese characters and the images of Peter Rabbit have already been registered in China."
Copyright critics
But CSSP's lawyer Dun Mingyue said: "The publishing house just wants to protect its legitimate rights."
China's Legal Daily newspaper said it was the first case of its kind in a country that is often criticised for failing to crack down on copyright infringements.
The story of the naughty rabbit has sold more than 150 million copies in 35 languages since first appearing in 1902.
Frederick Warne Ltd is a division of Penguin Books.
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