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Assuming you're making annotations for yourself, the copy of the annotated page in your cache is referenced, and bookmarks for where you annotated are stored in some other local file.

If they're sharing all annotations with other users of the browser, the bookmarks get stored on Microsoft servers and reference, perhaps, a digest of the annotated page.

No copyright infringement required.

Why would they need it?

I don't understand why the original comment is getting downvoted.

How can they implement this without copying the website in some form? It would constitute basic copyright infringement.

What do you mean? They simply add a layer of annotations over the site's HTML. You don't need to copy the website to do that.

You can't view a website without copying it; the copy is downloading it to your computer in the first place.

IANAL, but printing the page - the function every browser out there has had since forever - is, technically, creaton of a copy. Taking a pencil and drawing over that page is creating a derivative work. Passing that document to others is distribution.

Guess that goes under "fair use". Or something like that.