How to unlock the sword
Reach the Catacombs beneath the Manor and follow the Ghostwalker story into the Dream World. Defeat the emotion encounters and Hatred to resolve the soul-purification requirement. Use the Hatred guide if the final charged attack is stopping your progress.
How to use it in battle
Select the sword from Special when you have 2 Sword Energy. Level 1 Dodgy protects all allies through the entire enemy turn in which it activates, including multiple moves and hits. The level is removed at the end of that turn after preventing attacks. One use does not cover several future enemy turns, but it is also not used up by the first hit. Unlike Ghost Potion, this action does not apply Exhausted.
Before and after the unlock
It follows Venomshank and precedes Firebrand. You cannot include it in the first-clear setup for the Hatred fight that unlocks it. On later rematches, that additional protection option is available.