Is the sword in a container or just placed somewhere in the open?
If it is in a container, then you could attach a script to the container. Then you could use the OnItemRemoved event.
If it is placed in the open, then you could attach a script to a player alias and use the OnItemAdded event (I assume your scenario is part of a quest). Or surround the sword with a invisible volume that acts as an activator and attach a script to that. Then you could use the OnActivate event. The latter isn't foolproof, since the sword could be moved by accident before activating the invisible activator.