My god... I was the first to catch a bit of news! Okay, it was a fairly minor, but here we go...
Long story short, Elijah Schkeiban, author of "Bats and Butterflies", tried to claim that Avatar infringed on his story. After the lengthy court battle it was finally thrown out; the judge ruled that Shckeiban's book was "a straightforward children's story that lacks the depth and complexity of the moods expressed in Avatar".
I did take a look into "bats and butterflies" to see how legitimate a claim it was.
"In a fleeting moment of wizardry, Joshua is whisked away to Altair, a strange planet populated by warring factions of wicked bats and wondrous butterflies. As prophesied, he will begin a journey to aid the butterflies, on the way to fulfilling his destiny."
In truth it is little more than a children's story and asides from being on an alien world (and the main character having Jake's name from the original script), not very similar to Avatar. If that wasnt enough, the book was published in 2002; 6 years after the script was written.