My friends and I have recently started making a video game. We were going to make it an open world simulator, but can't figure out if using real cars with the real logos is copyright infringement. How can we stay on the right side of the law here?
Have a look into Grand Theft Auto by DMA Design.
Here you see an example of a selection of cars that were based upon real cars closely enough that they were instantly recognisable. They used names similar but not the same as the real names, in many cases using the car model's nicknames (Such as "Cossie" for the Ford Sierra Cosworth.
This game was immensely popular and spawned one of the best selling driving simulation game series of all time.
I've done some googling and found them to be the subject of many court cases, however none of them seemed to relate to any copyright claims by any car manufacturers or designers.
I'd be quite confident in following their lead, but of course I am not a lawyer
Do keep away from using brand names without permission though, that's just asking for trouble.
Mass produced functional items like cars aren't subject to copyright. What could get you in trouble is violating trademarks. It's not just name and logos the are trademarked, but also distinctive non-functional details like the front grill. Harley-Davidson even once tried to trademark the sound of their engines. A number of years ago Hummer ran advertisements in game magazines threating developers if they violated their trademarks. Cars can also be protected by design patents, but I don't know if such protection would extend to a depiction of a car in a video game.
I don't think there's any case law on this, and while my belief is that you would ultimately prevail in the courts if you, say, put a Ford Focus in your video game without permission, it would only be after a long and expensive battle. Regardless, the video game industry either thinks differently or has decided its not worth fighting these battles and either obtains permission to use real cars in their games (eg. most racing games), or makes up fake ones to include (eg. Grand Theft Auto and its various clones).
It is a risky endeavor, and I wouldn't want to try my luck. Rather, make something that is at best remotely similar, but not immediately recognizable.
There exist design patents, and the possibility that the owners enforce it is very real. If you make something that is at first look recognizable as XYZ, then you are heading for trouble. With some luck, nothing happens, but you don't know that.
Depending on how serious the owners of the design patents are, this can get very expensive for you (but even a simple C&D may easily cost you a couple of grands).
Remember the 1980s TV series Miami Vice with the black Ferrari Daytona? Turned out they didn't buy a Ferrari, but used a kit car which looked very similar. That worked well until the day Enzo came up with a lawsuit.