You are correct that a Catholic in an invalid marriage cannot be a godparent:
Can. 872 …A sponsor also helps the baptized person to lead a Christian life in keeping with baptism and to fulfill faithfully the obligations inherent in it.
Can. 874 §1. To be permitted to take on the function of sponsor a person must:
3/ be a Catholic who has been confirmed and has already received the most holy sacrament of the Eucharist and who leads a life of faith in keeping with the function to be taken on
Being married outside the Church is not in keeping with the function of being a sponsor who is to help the baptized faithfully fulfill the obligations of baptism. Church laws “bind those who have been baptized in the Catholic Church” (canon 11). If he is not fulfilling his obligations of baptism he can not be considered to be the person who can help others fulfill their obligations.
He also cannot be a Christian witness. The requirements of being a Christian witness is that the individual is not a Catholic:
Can. 874 §2. A baptized person who belongs to a non-Catholic ecclesial community is not to participate except together with a Catholic sponsor and then only as a witness of the baptism.
If you really want your brother-in-law to be a godparent then you should encourage him to have have his marriage validated in the Church.