My own opinion is that 'pure' software patents ought to go away. I would define a 'pure' software patent as one which encodes an algorithm that follows strictly from the intersection of math and of the computer it executes on, and also it would not allow for patents to be granted on the basis of application -- in other words a patent "using X for Y" would not be valid, either X is sufficiently pattentable on its own, or it is not -- whether or not X was applied to a novel problem wouldn't constitute uniqueness.
As an example, I don't personally believe that a compression algorithm that follows strictly from math should be patentable, even despite their exceeding cleverness. I see this simply as a side effect of the exploration of math, and I believe that math, once discovered, should not be owned by anyone. However, I believe that a theoretical video compression algorithm that achieved higher perceived visual quality because the algorithm specifically took into account the human visual system should be pattentable. For me, the difference is that integrating a further, specific constraint (rather than opportunity) into the algorithm itself elevates it beyond simple math. There's an additional. non-mechanical observation that's been studied, quantified, and integrated.
That sort of segues into an example of "using X for Y" that I would prefer to be disallowed. One of the dating websites has a patent on using standard data-mining techniques to find potential matches. Essentially, they claim a patent by labeling the rows and columns of their matrix with things like "likes dogs", instead of using an abstract variable. They would claim that their patent doesn't cover just their specific columns, their weights and their inter-relatedness, but indeed the very idea of labeling the rows and columns with personality traits for the purpose of determining compatibility.
Ironically, they have tons of secret sauce -- the additional, non-mechanical observation that's been studied, quantified, and integrated into their algorithm, and that's what I'd have them protect -- via patent, possibly, but perhaps copyright would be sufficient. That's the real value that they've discovered -- relationships like "straight women who like beer, dogs, and movies, statistically, find bearded men more attractive." or whatever. Its the ability to find and integrate those kinds of observations that from the pile of data that gives one dating site and edge over another, not the mechanical process of extracting it using well-known mathematics. To be clear, I don't mean to say that this dating site should instead claim ownership of particular, granular observations, but on the whole. I would probably prefer that this was more of a trade-secret, rather than a patent though.