Fighting will never solve anything if you win the person will only dislike you more, if you lose they will just keep picking on you because they know they can. Pease go to a trusted adult and let them know you are being bullied. There is no shame in telling on someone in this situation, by allowing this person to continue is the wrong thing. You are probably not the only one who this person has or will bully. You have the opportunity to stop the cycle.
I think the best thing to do when someone wants to fight you and you are not for the idea, is to walk away. Walking away will ease the other person's nerves and they will cool down and forget about the fight.
Get in trouble with whom? The school? Take it off of school grounds. Or like Rachel said, just walk away. But be prepared for a sneak attack from behind. Also, I highly recommend taking lessons in mixed martial arts. You'll learn how to submit your opponent without actually hurting him, he'll be forced to give up in front everybody watching and no bully will ever mess with you again.