Could you elaborate more on what and why document annotation is in a "sad" state? Even with a regular PDF file there are many ways you can annotate it: highlighting, adding text box, adding comments, drawing shapes, freehand writing -- without resorting to third-party software. So either your need for offline annotation is pretty advanced, or that you are yet to update your OS/software to take advantage of those.

As for the online part you may be conflating your point about offline annotation. Fermat's Library is about annotation sharing: implementing this functionality without any sort of identity management appears to me that it would basically be asking for trouble (imagine you could send e-mails to anyone without logging into anything).

It's easy to casually throw around phrases like "log in to a proprietary service" to criticise something. Perhaps that sentiment is understandable, but it doesn't really move the conversation forward or lead to better solutions. In this case I think it's just simply missing the point: at least at this point in time Fermat's Library's mission doesn't appear to be about grabbing your identity for profit. So unless there is something particularly fishy about what they are doing, that sort of criticism seems unfounded.