Question on protecting Windows applications with CyberFlex

The problem I'm trying to find solution for is the following:
I have application, that contains very important algorithms. I want to sell this application, but I need that nobody knows the algo, my applications is using. I decided to move such algos inside CyberFlex SmartCard. To do this - is very easy. In fact, I already did that (I wrote some applets and put them inside. I can call them, get data etc.).
But the next problem. These algos are updated from time to time. And I need to update them in each card (call it protection dongle) I sold. But nobody should get their source, because these algos are my secret.
So, now I'm trying to find the way of updating applets inside CyberFlex card in secure way (I can't require users to send me their cards to update...)
Secured channels looked suitable for me because of the next reason.
When I programm card, I already know all the keys for it. I can put the keys to the applet inside the card. When user needs upgrade, he runs my software. Software calls special applet inside the card, which adds random data to a key, encrypts it and returns to application in encrypted form.
User sends me this encrypted key. I decrypt it, remove random data from it, use it to encrypt secured channel data commands bytes (which should be used on that card) to load applet to a card and send back to user, He runs my software and it executes the code for secured channel, my user got from me.
Is this idea working at all?
My problem is that I still can't imagine the work of secured channel other that just encrypting the communication between my software and smartcard itself. As I understand, no random session key is used. Only AUTH key is needed for encryption.
Thank you for your help in advance.

First, you don't update an applet. It must be removed and downloaded again.
Second, you are re-inventing the wheel. What you are describing IS the purpose of the Global Platform secure channel. You are protecting the domain of the card with a mutual auth. From that auth, a secure channel is opened so you can manage the domain.
What you will run into is a bunch of issues, like key management, uncentralized application, getting keys to the card securely, card personalization...BUT, I'm not saying it can't be done!
I hate to be the bearer of bad news, but there are quite a few card management systems out there that do this. See ActivCard, Intercede, BellID, DeXaBadge, Alacris, Datakey, etc.

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