A shocked grandmother is accused of illegally downloading a video game. She's warned if she doesn't pay a settlement fee, she could face fines of up to $5,000.

Panicked foreign university students receive similar settlement demands over alleged piracy. It sparks fears they could be deported.

These are only the latest examples of the confusion and concern ignited by Canada's new copyright infringement notice system.

Some anti-piracy firms routinely send out letters demanding hundreds of dollars from Canadians for alleged illegal downloads. And if they don't pay up, recipients are told they could face legal action and big fines.

The problem is, people may be falsely accused and no one is under obligation to pay a settlement — not even a penny.

The government says it's aware of the problem. And yet, the emails keep coming.

Critics say it's time for Ottawa to take a serious look at its piracy notice system and decide what those letters can say to Canadians.

"It almost feels like blackmail," said Darren Mycroft of Calgary who received two notices demanding cash.

"'Pay us money and make it go away or it will get worse.' And that I feel is unfair."

Student 'openly wept'

The so-called "notice-and-notice" system came into effect at the start of 2015.

It requires internet service providers to forward copyright infringement notices to customers suspected of downloading unauthorized content such as movies, TV shows and video games.

Internet providers must forward the notices because the accusers can't, on their own, determine the identities of the people they're targeting.

The notice system was supposed to educate abusers and discourage piracy. But that's not the main message many Canadians are getting.

Ontario senior Christine McMillan and a scene from the video game she's accused of illegally downloading. (CBC)

This week, CBC News' Go Public reported about Christine McMillan from Kingston, Ont. In May, she received two emails forwarded by her internet provider.

They were from an anti-piracy company with a very official-sounding name — Canadian Intellectual Property Rights Enforcement (Canipre). Businesses like Canipre send piracy notices on behalf of production companies.

The notices accused McMillan of illegally downloading a mutant-killing video game — something the 86-year-old grandmother claims she didn't do.

The letters offered the opportunity to pay an unspecified settlement fee "to help avoid legal action."

The experience led McMillan to conclude Canada's notice system is flawed. "That, to me, is intimidation and I can't believe the government would support such action," she said.

Demands for settlement fees have raised concerns at the University of Manitoba.

The notices have also raised concerns at the University of Manitoba.

Since notice-and-notice came into effect the university — which is also an internet provider — has had to forward thousands of letters to students.

Joel Guénette, the university's copyright strategy manager, told CBC News in September that a good portion of the notices demand settlement fees and threaten legal action if students don't pay up.

Some notices were for sensitive material like porn. Guénette said the letters raised fears, especially among LGBT and foreign students.

"I have students coming to my office who are almost in a panic."

One such student "openly wept" in his office, he said.

Guénette explained that the student feared "he would be sent back to his home country where it was illegal to be gay, and where he would face possibly martial discipline or physical violence on behalf of his family members."

Guénette says the notice system discourages piracy, for the most part. But he would like to see the government create guidelines about the language that can be used.

"Many students are making decisions right now without having all the facts," he said.

Not all pirates sail the high seas. And not everyone accused of online piracy under Canada's 'notice-and-notice' system has actually done anything wrong. (Peter Mountain/Disney Enterprises/Associated Press)

'Educating through fear'

Mycroft, in Calgary, was also rattled when he received two letters last year, accusing him of illegally downloading porn — something he says he never did.

"I was really upset. It really bothered me."

Mycroft received the emails from Los Angeles anti-piracy firm, CEG TEK. He followed the link in the notices to a site that asked for his credit card information, full name and a settlement fee of $450.

Mycroft was already aware he didn't have to pay, so he ignored the messages. But the experience left him concerned about other people.

The whole point of the notice system "is to raise awareness," he said. "But you're educating them through fear, not lifting them up with knowledge."

CEG TEK has repeatedly refused to comment on the issue to CBC News. Canipre said it has so far collected about $500,000 in fees and that the notices it sends out aren't breaking any rules.

"Every single one of these claims can become a litigation at any time," said Barry Logan, the company's managing director.

But some legal experts say this is unlikely, claiming legal action would typically involve more money and effort than it's worth.

CBC News asked the federal government what it's doing to address concerns about settlement fee demands.

Innovation, Science and Economic Development Canada explained that the notice regime is up for review in late 2017.

Spokesman Hans Palmer said the review will allow it to "take stock and consider whether desired policy objectives are being met."