Don't display %title

I'm sorry, this post is too terse, I don't understand what you mean. What kind of pane, for example? Providing instructions to reproduce this will make it a lot easier to deal with.

I've noticed this hiccup too. For my use-case it might be a little more info than you're looking for. But here's all of it, let me know if it's helpful or not

I have a Views Content Pane whose title I wanted to link to a page on the site. At the time I didn't realize I could input an actual anchor tag into the Views Pane Title setting, so I headed to Panels to override it there. (I don't know why i thought I'd get away with it there and not in Views, heheh) On the Panel Pane, I clicked the little gear and selected Settings. On that overlay selected Override Title and in the box wrote <a href="/galleries">%title</a>. When I visited the site, the title was missing -- what was there was <a href="galleries"></a> but without a title inside the tags. I also tried removing the anchor tags and using %title alone (in case you couldn't put HTML in the title box and that was the culprit). Alas, in this instance nothing printed. I even lost the .pane-title heading tag altogether.. (I assume to the if ($title) logic in the panels-pane.tpl.php file). I thin finally just typed in FOO. and as expected, FOO appeared as the title. When i went back to just un-checking the Override title option in the Pane Settings in Panels, voila... title (pulling from the View Pane) is back.

If you're curious... for me this all started because I wanted to link the View Pane title to a page on the site but wasn't sure how to accomplish that without hard-coding an absolute URL or using a forward slash relative URL. Basically wanting to get the $base_path since i have a production and development environment. So for me, I reverted back to the plain Views Pane title for now since "/galleries" as a relative URL is different on my development site than it is on my production. Maybe I'll revisit it again further down my list of TODOs for the site.
Anyway, like I said, that's just an extra bit of background.

I hope the description helps out. If you need any more clarity just let me know!

Thanks!

Fixed in -dev. Note that this is a CTOOLS patch, not a Panels patch.

Patch applied is attached.