It sounds like the IR sensor or IR LED are bad. Sounds like you should just buy a new mouse, unless you have AppleCare on a machine that it came with or bought with it. In which case the mouse is covered under the computer's AppleCare coverage.
After some thought, I remembered the four key trick from a tech guy at work. Four keys: Option - Command - R - P at boot up fixed the mouse issue. Have no idea what else it "fixed" but the magic is back.
The reset just gave me hope but no permanent solution. I finally could not longer avoid the mall and went to the Apple Store while I was there. Note, I purchased my Mac Book Pro Retina from B&H Photo and purchased Apple Care with it. A few days after the Mac arrived, I purchased the Magic Mouse from the Apple Store. Today, I mentioned I had a Mac and explained the issues to the technician. A couple a minutes later she returned with a new mouse and apologized for the trouble I've had. She said she had to keep the new mouse box but if I had any future issues with the mouse bring it back and I could get another one. Really surprised. Did not think they would link the Apple Care to the mouse. Good day for me. Bought an extra lottery ticket.