Since Apple forced the update to JDK 7 on Mac, old AWT applets no longer support copy/paste. For example, if you visit:
Simple AWT Textfield Example
you cann
Here is a great and very detailed walk-through to do it the official Java way using their policy tool:
http://www.shodor.org/interactivate/resources/InstructionsCopyPaste/
Here is a quick summary of the instructions:
Until they fix the bug, I've found that signing the applet allows copy/paste to work.
Oracle released Java 6 Update 24 in February 2011 to remedy 21 vulnerabilities: Announcement
As part of this security release, the ability to copy & paste from a computer's clipboard into a Java applet has been disabled.
To fix this issue there are 2 solutions: