Are you using the System.Windows.Forms.Panel ? What did you meant when u said Panel derived control ?
If you are using System.Windows.Forms.Panel then, this looks like a problem with the custom control and not the panel.
could you provide more info on the custom control, if possible ?
From your photo it looks like something's highlighted, but the border doesn't match up with any visible controls.
Have you got an control that's hidden behind the rest somehow?
Solved: Apparently it was the fault of the touch screen driver. I can now reproduce the behaviour. If you click the "scroll down" button on any scroll bar via touch screen and hold it down for a while it keeps scrolling when you release it (the button stays pushed). After that you can click whereever you want, there will always be the "inverted colors" on the left side of the scroll bar. It happens with any application (explorer.exe!). Now it gets even better: Generally in Windows if you drag a scroll bar thumb button you can drift off of the scroll bar if you keep the mouse button pressed. But if you drift away too far the button will snap back to its original position (where you started dragging). Try it! The inverted colors rectangles are exactly as wide as the area where you can drift off without the button snapping back. I don't even try to understand this. We installed a newer driver for the touch screen which does not keep scrolling even after you released the "scroll down" button and the issue disappeared. My blood pressure is back to normal but all the grey hair is probably not turning black I guess... Thanks anyways...