Type mismatch error between java.lang.String and String

This is a really strange problem, I have never encountered anything like this. Below is a helper class that I declared in a larger class. It works fine as it is:

private static class Tree<String> {
    private Node<String> root;

    public Tree(String rootData) {
        root = new Node<String>();
        root.data = rootData;
        root.children = new ArrayList<Node<String>>();
    }

    private static class Node<String> {
        String data;
        Node<String> parent;
        ArrayList<Node<String>> children;
    }
}

However, messing around, I found a confusing problem. Replacing this line:

root.data = rootData;

with:

root.data = "some string literal";

I get this error:

Type mismatch: cannot convert from java.lang.String to String

I tested some string literals in other classes and it seemed to work fine. I recently upgraded to Java 1.7.0_15 and recently downloaded and installed Eclipse 4.2. I suspect there might be some kind of confusion about the build path or something like that. Using Ubuntu 12.04

Any help would be greatly appreciated! I searched and searched and could not find anything close to this problem.