Dropped by a Pirate Captain in Headwaters of Harstrad and a Pirate Captain at Haknir's Shoal.
It is required for the quest Deathbrand to locate the four ancient chests, each containing a piece of Deathbrand armor, scattered across Solstheim.
Headwaters of Harstrad
Headwaters of Harstrad on map
See Deathbrand Armor, Deathbrand Boots, Deathbrand Gauntlets, and Deathbrand Helm for info on the locations of the ancient chests.