Standing up for yourself doesn't have to involve violence - and certainly in most cases should not. I suppose if I were attacked by someone and had literally no viable alternative, I would fight back, but in general I would almost always have a viable alternative.
That's the key for children in this kind of situation. You should teach him to stand up for himself. You should also teach him how to stand up for himself. This isn't particularly different from teaching him how to express his anger in nonviolent ways, which is a pretty hard thing to explain to a child; in both cases it's a matter of providing tools for dealing with a situation.
The best way to avoid physical confrontations that aren't avoidable by truly pacifist means is probably to learn martial arts techniques for countering an opponent. I'm not an expert in martial arts (but I think we have one or two on the board), but from what I do know, some martial arts focus on defending yourself without attacking. Learning to block and counter attacks gives you the chance to disengage and leave, or at least to have others notice and break up the conflict.
Other tools of course are important for avoiding getting in that situation in the first place. In the case of bullying, in the long term I would hope he would ask for help, either from a teacher or his parents. This doesn't mean you have to intervene for him, but I would hope he'd ask for help figuring out how to deal with it.
In the short term, if the bully is physically attacking him, running away is a perfectly valid solution; run away, then address it with the proper authority. That's hard for a child to do, particularly one who is capable of defending himself, but given the penalties for fighting back - most schools suspend automatically for fighting, at least in the US, regardless of aggressor - it's the best.
For other sorts of physical or mental abuse, there are many different tactics that are appropriate. Particularly effective is relying on his group of friends for support; bullies are unlikely to be effective when you are in a group, as they can't really physically win that confrontation unless they're in a bigger group - and even then, having the support of your friends often can give you enough strength to withstand them as long as it doesn't get to physical blows. Ignoring also works well; bullies get bored in many cases if their bullying doesn't have an effect on you. If you're in a group, this is easier.