It took me a while to realise why this happened, but from vSphere 4.1, the Copy and Paste options are, by default, disabled for security reasons.

To be able to copy and paste between the guest operating system and the remote console, you must enable the Copy and Paste options using the vSphere Client.

To enable this option:

1.Log into a vCenter Server system using the vSphere Client and power off the virtual machine.
2.Select the virtual machine, on the Summary tab click Edit Settings.
3.Navigate to Options > Advanced > General and click Configuration Parameters.
4.Click Add Row and type the following values in the Name and Value columns:
•isolation.tools.copy.disable – false
•isolation.tools.paste.disable – false

Source:VMwareKB