A writer recently asked me:
I'm working on a novel and want to use the names of colleges, counties, and landmarks. Are there any legalities that I need to be aware of? The use of these names are not to suggest any type of culpability on their part, but to make the novel more realistic.
(Example: For the first time in the history of Brigham Young University, their men's basketball team was on the verge of capturing the school's first national title; little did anyone know that it was to be a moment everyone would remember for the disaster that was about to unfold.)
Read almost any mainstream novel and you'll find plenty of references to real places, real organizations, and even real people. It looks as if you could mention them all with impunity. But it's not always that easy.
Certainly it lends believability to the story to set it on the campus of BYU, or Harvard, or Microsoft. But we should be careful when we do so—for literary as well as legal reasons.
The legal reasons have to do with characters who may be identifiable to those who know the organization. I have no idea who's coaching BYU's basketball team these days, but a lot of people must. Just changing the name won't be enough. Any trait that coach possesses could cause people to say "Aha! So that's what the guy is really like."
Fictional Invasion of Privacy
You don't even have to say false and libellous things about the coach. Even saying nice things about him could get you sued for invasion of privacy...and even more so if you're saying nice things about the coach's spouse. The coach, after all, is a public figure; under the principle of fair comment, he has to expect some public criticism. His spouse, however, is probably minding her own business and therefore doesn't have to put up with BS from the media.
No less a figure than John Le Carré went out of his way, in his recent novel The Constant Gardener, to assure his readers that the British embassy he portrayed in his fictional Nairobi was utterly unlike the real one—especially in the staff. And as an ex-spy, he has always taken pains to remind us that the techniques and shop talk he invented for the George Smiley novels are not the "tradecraft" of real intelligence agencies.
Only at BYU
We should use real settings if we have solid literary reasons for doing so. If we set a novel on the BYU campus, we're telling our readers that only at BYU, and nowhere else, could this story take place. The university is itself a character in the story, and its culture influences the characters and the story's outcome. Set the story at U of Nebraska, or Brown, or McGill, and it will be a different story.
Sometimes an author will create a fictitious setting, like Tom Wolfe's "Dupont University" in his latest novel. Then he can invoke the Ivy League aura of Harvard or Yale without tripping on technical details (or accidentally portraying a real professor). Evan Hunter, in his 87th Precinct novels, rotates Manhattan 90 degrees, changes New York's name to "Isola," and sends his cops out into streets that are familiar but designed for the author's convenience. These are often useful strategies, though many readers really do want that documentary feel of strolling through Harvard Yard or necking in the subway station at 116th and Broadway.
Well, that's the long answer. The short answer is: Use real settings when you need to; always make the characters are your own invention, however much they share the culture of their settings.