Schengen visa refused ("threat to internal security [...]"): I don't need the visa anymore but want to clear the misunderstanding, what can I do?

As I understand it, you have been refused a Schengen visa for the formulaic reason...

One or more member state(s) consider you to be a threat to public policy, internal security, public health as defined in Article 2(19) of Regulation (EC) No 562/2006 (Schengen Borders Code) or the international relations of one or more of the member states).

...expressed in whatever language the Schengen member uses. You believe this reason is a mistake and you want something like a 'road map' for how to fix it. Whatever you do, do not apply again until there's some shape on your case.

There is no easy way or quick way to do this and instructing a lawyer at some point is inevitable. There are some generic steps to take, but first let's define what is useful to know...

Subject Access Rights under EC Data Protection Directive (95/46/EC): Each member state has implemented local laws that provide an individual the right to know what information is held about them. All aspects of a Schengen refusal are covered with the EU's data protection regime and you may be able to use this provision to find out what information is stored about you. The problem you may have is that those laws provide an exemption for sensitive cases and it's likely you will need to appeal against their exemption.

Article 19 of the Universal Declaration of Human Rights: This has also been enacted into local laws in the various member states. Part of it requires member states to fix inaccurate data. You will be relying heavily on its provisions so it's worthwhile to spend time reading about it. There are hundreds of on-the-ground cases where people have benefited from Article 19.

There is also the avenue of judicial review, which can force a public body to reverse an unreasonable decision. More about that later.

Having said all of that, your "road map" would be...

1. Study your access rights under EC Data Protection Directive (95/46/EC) and submit the form requesting disclosure of your data. They have a maximum of 40 days to respond from the time your request is complete, which means you should expect them to require proof of identity and prepare for it. You can actually instruct a practitioner to handle this step, but it's just as effective and cheaper to do this yourself.
2. When they respond, even with a refusal, you will then be in a position to instruct a local practitioner. There is no requirement to hire a practitioner, but knowledge of the local language can accelerate the process. Usually they are happy to communicate in English also, but failing that you can expect to pay a premium if they have to translate all the correspondence for you. In selecting a practitioner, be sure they have credentials in Article 19 cases.
3. The practitioner will go about the hoops of fixing the inaccurate information (if it can be done). This may entail an appearance at the local court (you will need to get a special type of visa for this). You will also be required to present evidence showing that the information is not accurate and you should begin doing this at the outset so that it is translated and organized.
4. Once the information has been corrected locally it will need to propagate through the other systems in order for you to travel comfortably, this could take up to six weeks.
5. You can apply for another Schengen when your practitioner gives you the go-ahead. It is unwise to try to get another visa before that because it builds a separate case against your credibility.

Finally, if the above fails and you are convinced the information is in error, your practitioner may suggest a judicial review. These laws vary widely between the member states and some will offer more latitude than others. On the plus side, lots of JR's are resolved during the pre-action protocol stage. On the down side, JR's require court appearances and take a very long time. For that reason, consider Article 19 to be your most fruitful avenue.

There is more information here Schengen visa refusal on threat to public policy, security, health (Germany)

The controlling technical reference for Subject Access Rights is here: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Al14012

The controlling technical reference for Article 19 is here: http://www.un.org/en/universal-declaration-human-rights/ Also searching the net, you'll find hundreds of cases where Article 19 was used successfully to remove inaccurate information.

You can locate a licensed EU legal practitioner with credentials in Article 19 here: http://communities.lawsociety.org.uk/brussels/

Generally speaking, the advice is still the same: You need to get assistance from a lawyer. The fact that the original delay for an appeal has (almost) passed isn't very important, especially now that the premise of the original trip is not valid anymore. If needed, you can just restart the process by applying for another visa.

The details depend on the country but typically, you always start from a visa application for a specific trip, creating one if necessary. And to get to the bottom of this, you want that application to be very solid, lest the consulate finds another reason to reject it and leaves you none the wiser. That's why it's important to hire a lawyer even before you submit your next visa application.

So, if appealing the last refusal is not possible anymore, you will apply for another visa with the help of your lawyer, then, once it has been refused again, file an appeal and when that appeal is refused, go to court. Your lawyer will most likely tell you that you should not hope the appeal (or a new application) to be successful but you first need to do all that to have an effective decision and legal standing to dispute it in court.

Obviously, this involves additional costs and delays but that's unavoidable. Lawyer fees for a very simple appeal can run in the thousands and the whole process take months so a couple of extra weeks and the €60 fee for the application do not really make a difference.

Finally, note that there is also procedure to know if an alert has been placed against you in the Schengen Information System: How can I find out if someone is in the Schengen Information System (SIS)? But that's unlikely to help here because there is another item on the form for refusals based on a SIS entry.