Forked from a comment in a post by Barry Schnell

One thing to note here is that the invalid search criteria that you typed is persisted in the search box each time you re-open the lookup popup until you’ve typed something new again in the lookup field.

Steps to reproduce:
1) Type invalid search criteria
2) Click mag glass - note that what you typed in is the search field as expected
3) Delete what is in the search box.  The list of accounts is now displayed since there is no search criteria specified
4) Click cancel
** When you return to the main screen, the invalid text you typed has been removed since it is not a valid account.  This is expected.
5) Click mag glass - Note that the search critieria contains the previous value that you typed in step #1 and you deleted in step #3.
6) change the search criteria to a different invalid value
7) click cancel
8) click mag glass - Note that the search criteria you typed in step #1 remains

Thanks!