To obtain the Venomous Steel Sword Diagram, you must be concluding the Hearts of Stone Main Quest: Open Sesame (Part 2). The culmination and battle between the brothers Borsodi should have ended, leaving you in the large basement vault of the Borsodi Auction House. Before you leave via the secret door to the south of this basement, check the two chests near the pillar with the pressure plate; there are actually two valuable diagrams; for an Ofieri Crossbow (which isn’t relevant to this Scavenger Hunt, but is included as the weapon is impressive) and the Venomous Steel Sword. Don’t forget them before you leave!
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Items: Diagram: Ofier Crossbow, Diagram: Viper Venomous Steel Sword |