It is unfortunate that sometimes in families in-laws play favorites with children. This of course can result in hurt to the rejected child or children. Parents are often tempted to take up an offense for the rejected one and try to protect them by either confronting the in-law or withdrawing the whole family from that offending person. This usually results in an ongoing battle in the family which only causes injury to every member.
May I suggest an alternative response? I say that the best protection for a child is excellent preparation. There will be many important people in your child's adulthood who will not treat your child as you would want or as they would like. So, how can you use this experience to actually benefit your child without attempting to change the people involved. You must realize that a GOAL is something you have sole control over and a WISH is dependent on another over whom you have no control. So, helping your child to set goals not wishes and focusing on them yourself is the only effective way to deal with this.
Explain to your child this difference and tell them you will help them make good goals in this unfair situation. You must set aside your rose colored glasses and your excuses for your beloved child and look at his behavior very clearly. Ask your spouse and yourself if there is any quality in your child or habit of action that would block good relationships with others and write down what comes to mind. Then the goal is to develop the character and actions that will make his future relationships warm and successful most of the time and use these difficult people to practice on.
Now approach your child. Explain that sometimes people love others with selfish goals and this always ends up hurting others and them as well. Tell your child good qualities he has that sadly these people will not benefit from because of their choices. Now, tell your child one issue that could be improved that could help others like him more. Maybe, as you have clearly evaluated your child, you have discovered that he butts into the space or conversations of others and therefore is seen as rude. Help him to focus on what others are doing and to calmly and politely say, "excuse me please" and wait for the other to respond before running on with what is important to him. Play act this together with you sometimes making him wait to be acknowledged and other times you bend toward the child, give eye contact and your full attention. Remind him that when someone focuses on you and what is important to you it makes you feel good about yourself and them so he could work on focusing on what is important to others and make them feel good too. Being polite and waiting is one way to do that. They can practice this on "So and So" the in-law and get really good at it. Remind them that "So and So" may be too stuck in their habits of rejection to show any change but this characteristic in him will make a big difference in his other friendships for his life.
Another step he could take is to talk together with you and your spouse about any needs that you see that in-law has. Is there some way he could help to meet that need. This could be done along with your help in the background if needed but it should appear as mostly from him. This is practice in learning to love the unlovely and there will be plenty of those in his life but this focus of love will keep him from being one of them.
Turning this hurtful situation into pro-active growth insures that your child will learn that nothing can really hurt us if we face it as a golden opportunity to grow. And as your child and you respond lovingly to this unloving self-focused person they just might change as well.