Deborah,
When dealing with someone who is like your brother in law there are 3 possible alternatives. 1. Do nothing and ignore him. Keep doing things the way you always have, ethically and honestly and hope that he will eventually get tired of spending all of his time and energy trying to tear down your company's business as opposed to building his own. 2. Contact an attorney and show him proof of your brother in law's actions. Discuss the possibility of filing a law suit or possibly have the attorney send a letter warning your brother in law that if he doesn't cease and desist with his actions that you will file a suit.
3. Get all the proof that you have of him running his own business in competition with the company he works for. Pictures receipts, proposals, the more the better. Schedule a meeting with him and show him copies of the evidence that you have. The tell him that if he doesn't stop bad mouthing your company that you will make sure that this evidence is sent to the President or owner of his current company. If you feel intimidated by him, bring along the biggest scariest male friend that you have to the meeting. Have him just sit there and stare at your brother in law the entire meeting.
There is a fourth alternative that involves baseball bats and is what we use in New Jersey however, it can get rather messy and after all he is your brother in law.
Good luck!

Deborah,
Try going through this with a partner that you've bought out & they try to steal your phone #, old location & try to take control of your websites.

I can relate going through a situation with a partner that was similar to your brother-in-law, because of their unethical ways of doing business we bought the partner out, paid allot of money and they try to compete in unethical ways as well.
sure makes for tough "family functions"

My advice - ignore him & focus on what you are good at.

Think of him as a soda can, he's all full of bubbles and fizz for the short term give it some time and the gas will run out. any reputable customers of yours will not listen to none sense, anyone that does probably has similar views on business as your brother-in-law and is that type of customer really worth having?

Strong ethics & good credit are keys to success