Parallels 10 on Mac OS 10.10.1 - Cannot click edges of screen in Mac 10.8.5 VM

I am running Parallels 10.1.1. on Mac OS 10.10.1. The VM I am using is Mac OS 10.8.5.

I cannot click anywhere in a large border around all edges of the screen. When I take the mouse to the edge of the screen, it just skips out of the window and back into the host OS. I have installed Parallel Tools, and the issue is still there except it doesn't skip out of the VM window - it shows the cursor in the right location but doesn't register any clicks. You can see the issue in this video (first half without Parallels Tools installed and the second with):

Does anyone know how to resolve this?