copyright - How can I handle intellectual property violations in user-generated content?

I recently made a simulation game like Gamedev Tycoon where you are in charge of a game company and planning to release it on app stores soon.

I have few questions about trademark and copyright laws, as in game there are different companies (competitor) who release games, make sequels to previous games, release consoles etc. I know that under parody law I can change a company name from MICROSOFT to MICROCRAFT or MINORCRAFT etc. But what if I provide users an editor where they can change company names (if they want to) from MICROCRAFT to MICROSOFT?

Do changes made by players with my editor violate any copyright or trademark law? How can I handle that?

Answer

But what if I provide users an editor where they can change company names (if they want to) from MICROCRAFT to MICROSOFT?

Generally, when you provide tools that allow your users to produce content for your game, you'll want to include in your game's license agreement terms that dictate how and what may be produced. The single- or multi-player nature of the game isn't really an issue, the issue is if the content can be reasonably expected to be distributed by users. It almost certainly always can.

For example, Skyrim is a single-player game that includes official modding tools in the form of its Creation Kit. The EULA for the Creation Kit requires that:

You shall not create any New Materials that infringe upon the rights of others, or that are libelous, defamatory, harassing, or threatening, and You shall comply with all applicable laws in connection with the New Materials.

This kind of clause helps to indemnify you, the author of the software, against intellectual property violations perpetuated by (and appearing to be part of) your software.

Include such a clause in your EULA.