What happens if a creature draws a Frost Brand sword when breathed upon by a fire-breathing dragon?

Question

Frost brand weapons have the following property if attuned:

When you draw this weapon, you can extinguish all nonmagical flames within 30 feet of you. This property can be used no more than once per hour.

According to the Sage Advice Compendium, a dragon's breath weapon is mechanically considered non-magical.

If a creature attuned to a frost brand readies an action to draw it when breathed on by an enemy fire dragon, what happens when the dragon breathes?

1. The breath gets extinguished (thus not affecting the frost brand-wielding creature)
2. The breath weapon works as normal, since it doesn't really emit "flames" in game terms

Answer 1

Neither - Readied actions come after their triggers

The character Readied an action to draw the weapon and set the trigger to be when breathed upon with a breath weapon by the dragon. Unfortunately for the character, readied actions happen after their triggers.

When the trigger occurs, you can either take your reaction right after the trigger finishes or ignore the trigger.

Thus, the breath weapon would hit and its effects resolved. Then, the readied action happens and the weapon is drawn. Too late, unfortunately, to stop the breath weapon which is already gone now.

There is no valid trigger that works for this

Any readied action you could set would either take place before the breath attack occurred (doing nothing to it) or after (also doing nothing to it per the above). There is no trigger that you can set that would allow you to (potentially) interrupt the actual attack by drawing your blade during the attack itself.

A fire-breathing dragon breathes actual fire

If you look at red dragons' breath weapon ability - for instance, a red dragon wyrmling's Fire Breath action - it says:

The dragon exhales fire in a 15-foot cone.

Fire and flame are synonymous; thus, if you had some sort of effect that continuously extinguished flame, a dragon's fire breath would also be extinguished if used while the effect was active.

Answer 2

3. The breath weapon resolves, then gets extinguished

A Readied action takes place after its trigger finishes. If you Ready an action to draw the weapon with the trigger "when it uses its breath weapon", then the extinguishing power from the frost brand applies only after the breath resolves (i.e. after rolling the save and taking damage).