The expression paper fiction, meaning some state of affairs that only exists on paper but not in reality, emerges at least by the 1850s, primarily in America:
The pretension of Great Britain is not in this respect to protect an existing state or people, but to select a handful of Indians, subjects of Nicaragua and Honduras, and by paper-fiction treat them as a government in appearance, while clearly not so in fact, and to exercise all the powers of government in their name. — Caleb Cushing, Attorney General, Letter to the Sec'y of State, 28 May 1853.
The Lecompton Constitution is expressly repudiated by the immense majority of the people. Consequently it is no more the Constitution of Kansas, than the word “Kansas” written in it is all the land and water, fruits and timber, of that beautiful Territory. It is a mere paper fiction, and it is idle to pretend, that to force those people into the Union under that Constitution is compatible with popular sovereignty. — Daily State Sentinel (Indianapolis), 24 Feb.1858.
First, I assume that sufficient interest has been recently excited both theoretically and practically in the question of Latin pronunciation, to make teachers and scholars willing to take a good deal of personal trouble to gain some insight into its nature as a living reality and not merely as a paper fiction. — Alexander John Ellis, Practical hints on the quantitative pronunciation of Latin, London, 1874, 2.
Now, this is not a mere paper fiction. It represents the scientific and economic facts in their true light, and it brings to a focus the evidence which proves the truth that the price or cost of the exclusive use of land never is, and can never be, eliminated from the balance of profit over the total cost of its products, whether the land is actually let for a rent or not. — George Douglas Campbell, Duke of Argyle, The Unseen Foundations of Society, London, 1893.
The League [of Nations] is a paper fiction —without the navy of England. Regretfully we must conclude that the League is a political instrumentality with a moral facade employable at will by England to meet her particular demands. There is no other true explanation for the League's failure to act in Bolivia, in Manchuria, and in Europe heretofore, or in China today. — US Senate Foreign Relations Committee, Hearing on Neutrality, 5 Feb. 1936, 262.
The proof on the entire record was that Respondent engaged in the paper fiction of changing his classification because it thought this would free him, a supervisor, to work against the Union without implicating Respondent. — Decisions and Orders of the National Labor Relations Board, 152 (Apr. 16–June 16, 1965), 1966, 248.
The phrase becomes less frequent in the later 20th c., but the large number of false hits makes it impossible to map usage over time with any accuracy.