united-states
This answer is based on US law. On many points the laws of other countries will be similar, but probably not on all points.
See also this answer to a previous related question.
Copyright on Fictional Names
The point is not that these are fictional names of places, companies, and brands, but that they are fictional names taken from the existing game. Even so, there is no copyright in such names.{1}. If if such fictional names are registered as trademarks, unless they are being used to advertise, promote, label or identify the new game, they are not being "used in commerce" and so would not individually infringe any trademark.
Derivative works
However, the use of such names, particularly the use of number of them together, might be evidence that the new game is a derivative work. But the statement in the question that the new game would be "a knock-off GTA-esqe game" already suggests that this might be a derivative work. Fopr US Law this concept is defined by 17 USC 101. The key phrased is "a work based upon one or more preexisting works".{2} The law does not directly define "based on", leaving that to the examples in the law, dictionary definitions, and most importantly case law.
Note that under 17 USC 106 (2) one of the exclusive rights of a copyright holder is:
to prepare derivative works based upon the copyrighted work;
Merely creating such a derivative work, even without distributing it, is infringement, unless permission from the copyright owner is obtained. Distribution would increase the damages, and the chance of any suit over an undistributed derivative created merely for personal use is quite small.
17 USC 102(b) is very clear that ideas are not protected by copyright.{3} Thus a game embodying the general concept of a criminal seeking to steal cars and avoid the and the police would not be an infringement of copyright.
Distinctive Elements and the Nichols Case
But the more of the distinctive and specific original expression that is copied or imitated from the alleged source, the more likely the later work is to be held to be derivative. This was established in the key case Nichols v. Universal Pictures Corporation, 45 F. 2d 119 - Circuit Court of Appeals, 2nd Circuit (1930). In that case the well-knmown Judge Learned Hand wrote:
It follows that the less developed the characters, the less they can be copyrighted; that is the penalty an author must bear for marking them too indistinctly. ...
...
... granting that the plaintiff's play was wholly original, and assuming that novelty is not essential to a copyright, there is no monopoly in such a background. Though the plaintiff discovered the vein, she could not keep it to herself; so defined, the theme was too generalized an abstraction from what she wrote. It was only a part of her "ideas."
In this case and in and later cases on the same issue, the "distinctiveness" of a character and the degree to which an alleged infringer has imitated "specific characteristics" of a distinctive character became important tests for whether imitating a character resulted in a derivative work. For a tiem the test applied was whater "a character is the story being told" but this was later rejected, and imitating distinctive characters became again a basis for classifying a work as derivative.
Similarly, imitation of a setting can lead to a later work benign treated as derivative if original and distinctive elements of the source work are copied or closely imitated. The more generic such elements are, the less protection they will get. The more that the later author has modified those elements so as to "make them his or her own", adding original details and characteristics and not depending on the detailed aspects of the original, the less likely such a work is to be considered a derivative work.
Conclusion
Whether a later work is a derivative of an earlier one is always a judgement call, to be decided case-by-case on the detailed facts. There is no mechanical formula which will yield an accurate answer. Consulting an experienced IP lawyer can help, as such a lawyer can consider the full details, and compare them to previous decisions in relevant caselaw, which are often good predictors of future decisions.
Notes
{1} US Copyright Office Circular 33 "Works Not Protected
by Copyright" page 2 reads:
Words and short phrases, such as names, titles, and slogans, are uncopyrightable because they contain
an insufficient amount of authorship. The Office will not register individual words or brief combinations of words, even if the word or short phrase is novel, distinctive, or lends itself to a play on words
{2} The full definition reads:
A “derivative work” is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications, which, as a whole, represent an original work of authorship, is a “derivative work”.
{3} 17 USC 102 (b) reads:
In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.
