You're mixing up copyright, patents, and trade secrets.

The Phoenix BIOS case was a copyright infringement case--IBM wasn't claiming that there was anything about the "how it works" of the BIOS itself that was protected, but that Phoenix must have copied the actual code.

Should clean room implementations be allowed when the "how it works" is the interesting part? Say I spent years developing an ultrasound imaging algorithm. I sell an ultrasound machine with that algorithm. A competitor comes along and says "gee, these work really well, I wonder how they work?" So they reverse-engineer my design, and do a clean room implementation of it, instead of coming up with their own design.

It will take them a good deal of time and money to clean room reverse engineer a non-trivial algorithm. During that time you can profit from your invention, and advance your product. It will probably cost more money from them to clean room reverse-engineer your product than to just license it from you. Phoenix BIOS only happened because the code was small and the reward for interoperability so artificially large due to IBM's control. If the BIOS just did something useful (a) there would probably be academic papers on how it worked, or (b) other people would probably have just licensed it.