"I buy expensive toys and Nylabones for the dogs but what do they love better...an old towel tied in a knot!" "Then they wore themselves out" :-). "Jake wasn't relinquishing control though". haa haa
It is not recommend that you try to step in and break up the fight yourself by pulling on the dogs tail or leg. It could hurt your dog and weaken his defense against the raccoon. Depending on how long the fight has been in progress, your dog could have traces of the raccoon's saliva in any number of places. If the raccoon has rabies, your dog could pass it on to you if you have any sort of open scratch or cut or if you inadvertently touch your mouth or eyes with the saliva on your hands. He could also pass it on to one of your other pets or family members the same way.
Try using a 2 x 4, a long handled rake or shovel to help pry the two apart, an air horn, fire extinguisher, or water hose. Just try not to spray your dogs face with the fire extinguisher which could be very hard to do while they are in the middle of a raccoon fight. Then use gloves to pick up your dog and quarantine him until you can get to a vet. Get your pet to the vet immediately after an altercation with a raccoon. Your pet can seem fine up to 6 months after being bitten by a raccoon who is carrying the rabies virus. I know this all sounds odd considering this all takes time and when your dog is in the middle of a fight, you are not thinking clearly enough to run and hook up a hose or grab a pair of gloves for that matter.
To get rid of any pesky raccoons, take away their sources of food. Make your yard unappealing for them to make a home. Strap down the garbage lids, take away the bird feeders, and get rid of any sources of water. If you are thinking of removing them yourselves, raccoons are very smart and can figure out a trap. If your raccoon has babies, they will starve without the mother. It is best to call someone to remove them property and humanely without using poison or other in-humane tactics.
If animal control refuses to come, ask them for the number of a local wildlife rehabilitator and get advice tailored to your specific location.
Another option is to contact a licensed professional trapper who will have been vaccinated against rabies, to take care of this for you. If it’s a family of raccoons, they can relocate the entire bunch together.
Wild animals carry diseases and they can wonder into your yard at any time. Before I let the dogs out at night, I turn on our back flood lights so that I can see the entire yard. I scan the yard for any movement as I'm walking out. We have 6 lights placed in 3 places which lights up the yard and sometimes I think we need more. I still can't forget the early morning when I ran into 2 very large coyotes coming from the back of our property behind our shed. I did not see them until they were right behind me. Turns out they were wolf/coyote hybrids that were running our property for a while. Fortunately for me, they let me and the dogs be but I didn't take any chances and immediately but carefully walked back to the garage!