The challenge from the Canadian Civil Liberties Association comes amid revelations that telecommunications companies have been giving private customer information to government agencies on a broad scale.
In its application to the Ontario Superior Court, the association says law enforcement may have a need for some personal information, but the current law is too broad and should be struck down.
The association is joined in the court action by researcher Christopher Parsons, who has helped lead an effort to ask Canadian telecommunication companies when and how they hand customer information to police and security agencies.
The association says the consequences of allowing government to have and share personal information without the person's knowledge or consent can be very serious and violate fundamental constitutional rights.
Involving private companies further complicates matters, the association said Wednesday in a statement.
"Non-state actors are playing an increasingly large role in providing law enforcement and government agencies with information they request," said Sukanya Pillay, the association's general counsel.
"The current scheme is completely lacking in transparency and is inadequate in terms of accountability mechanisms."
The court filing says the law allows government agencies to share information with foreign governments in some cases.
"When the requesting government agency has shared information with a foreign jurisdiction, Canada effectively loses control over the information, its use and further disclosure, increasing the risk of serious and adverse consequences."
The association and Parsons want specific parts of the federal privacy law — known as the Personal Information Protection and Electronic Documents Act — struck down as violations of the Charter of Rights and Freedoms.
They contend the provisions violate charter guarantees of liberty and security of the person as well as the right to be free from unreasonable search and seizure.
Parsons, a postdoctoral fellow at the University of Toronto's Citizen Lab, said in March that just 10 of 16 Internet and telephone companies responded to a January questionnaire about their practices.
While many companies said they were committed to maintaining privacy, they declined to indicate exactly how they evaluate state agencies' requests for customer data, Parsons said.
As a result, Canadians know little more about the degree to which companies share information with state agencies including the police, Canadian Security Intelligence Service and eavesdropping agency Communications Security Establishment Canada.
The notice of application says some providers argue they are prohibited from disclosing this information — even at an aggregate level — or that the law is unclear on what they can say publicly.
But there are exceptions.
Statistics tabled in Parliament in response to a formal question from NDP digital issues critic Charmaine Borg show telecommunications companies responded to more than 18,000 requests for data in 2012-13 from the Canada Border Services Agency, the vast majority involving basic subscriber information.
The border agency said it asks for information from providers about customers when it believes it is needed to investigate possible law-breaking.
On Thursday, a group of academics and others concerned about state surveillance will release a statement on the need to respect the privacy of Canadians.