Using a more specific approach for managing CM focus.

I used to try and enter command mode when a cell looses focus. The
problem with that is that focusing an output area would remain in
edit mode.

Now, I bind this logic to the code mirror blur event, so that
focusing the output area enters command mode.

IPython/html/static/base/js/utils.js

@@ -455,6 +455,26 IPython.utils = (function (IPython) {
         return M;
     })();
 
+    var is_or_has = function (a, b) {
+        // Is b a child of a or a itself?
+        return a.has(b).length !==0 || a.is(b);
+    }
+
+    var is_focused = function (e) {
+        // Is element e, or one of its children focused?
+        e = $(e);
+        var target = $(document.activeElement);
+        if (target.length > 0) {
+            if (is_or_has(e, target)) {
+                return true;
+            } else {
+                return false;
+            }
+        } else {
+            return false;
+        }
+    }
+
 
     return {
         regex_split : regex_split,
@@ -475,7 +495,9 IPython.utils = (function (IPython) {
         encode_uri_components : encode_uri_components,
         splitext : splitext,
         always_new : always_new,
-        browser : browser
+        browser : browser,
+        is_or_has : is_or_has,
+        is_focused : is_focused
     };
 
 }(IPython));

IPython/html/static/notebook/js/cell.js

@@ -110,52 +110,15 var IPython = (function (IPython) {
         var that = this;
         // We trigger events so that Cell doesn't have to depend on Notebook.
         that.element.click(function (event) {
-            if (that.selected === false) {
+            if (!that.selected) {
                 $([IPython.events]).trigger('select.Cell', {'cell':that});
             };
         });
         that.element.focusin(function (event) {
-            if (that.selected === false) {
+            if (!that.selected) {
                 $([IPython.events]).trigger('select.Cell', {'cell':that});
             };
         });
-        that.element.focusout(function (event) {
-            var is_or_has = function (a, b) {
-                // Is b a child of a or a itself?
-                return a.has(b).length !==0 || a.is(b);
-            }
-            if (that.mode === 'edit') {
-                // Most of the time, when a cell is in edit mode and focusout
-                // fires, it means we should enter command mode. But there are cases
-                // when we should not enter command mode.
-                setTimeout(function () {
-                    var trigger = true;
-                    var target = $(document.activeElement);
-                    var completer = $('div.completions');
-                    var tooltip = $('div#tooltip');
-                    if (target.length > 0) {
-                        // If the focused element (target) is inside the cell
-                        // (that.element) don't enter command mode.
-                        if (is_or_has(that.element, target)) {
-                            trigger = false;
-                        // The focused element is outside the cell
-                        } else {
-                            // If the focused element is the tooltip or completer
-                            // don't enter command mode, otherwise do.
-                            trigger = true;
-                            if (tooltip.length > 0 && is_or_has(tooltip, target)) {
-                                trigger = false;
-                            } else if (completer.length > 0 && is_or_has(completer, target)) {
-                                trigger = false;
-                            }
-                        }
-                    }
-                    if (trigger) {
-                        $([IPython.events]).trigger('command_mode.Cell', {'cell':that});
-                    }
-                }, 1);
-            };
-        });
         if (this.code_mirror) {
             this.code_mirror.on("change", function(cm, change) {
                 $([IPython.events]).trigger("set_dirty.Notebook", {value: true});
@@ -166,6 +129,22 var IPython = (function (IPython) {
                 $([IPython.events]).trigger('edit_mode.Cell', {cell: that});
             });
         };
+        if (this.code_mirror) {
+            this.code_mirror.on('blur', function(cm, change) {
+                if (that.mode === 'edit') {
+                    setTimeout(function () {
+                        var isf = IPython.utils.is_focused;
+                        var trigger = true;
+                        if (isf('div#tooltip') || isf('div.completions')) {
+                            trigger = false;
+                        }
+                        if (trigger) {
+                            $([IPython.events]).trigger('command_mode.Cell', {cell: that});
+                        }
+                    }, 1);
+                }
+            });
+        };
     };
 
     /**