May saw the publication of The Family Corleone, a prequel to the original Godfather book based on one of Puzo's unpublished screenplays.
Paramount is claiming to have purchased from Puzo all rights and copyright interests to The Godfather in 1969, including "literary" rights and rights to use any of the characters in "other works", reports Entertainment Weekly.
Lawyers for Anthony Puzo, who inherited his father's estate after his death in 1999, claim that the agreement excluded book publication rights, and that Paramount "got nasty" by contacting the publishers of The Family Corleone and insisting they had "no right" to publish it.
The Puzo estate's lawyers claimed in a statement: "The rights repudiated and violated by Paramount were of fundamental and critical importance to Puzo and were of the essence of the 1969 agreement.
"More than once, Puzo said, 'Books are my world', explaining why Paramount didn't get book rights and wouldn't get them."
The case is now headed to federal court - despite earlier reports that Paramount and the Puzo estate had settled over the initial lawsuit issued by the studio.
Francis Ford Coppola, who wrote all three Godfather movies and directed parts I and II, recently went on record as saying that he thinks there never should have been any sequels to the first film.
Watch the trailer for The Godfather below: