<PAGE>   1
                                                                   Exhibit 10.16


                              EMPLOYMENT AGREEMENT

THIS AGREEMENT is entered into effective as of the 1st day of September, 1997,
between AMERICAN TECHNOLOGY CORPORATION, a Delaware publicly traded corporation
(the "Company"), and Elwood G. Norris ("Employee").

Employee, in consideration of the covenants and agreements hereinafter
contained, agrees as follows with respect to the employment of the Company of
Employee and Employees future business activities.

1. Employment: Term of Employment. The Company hereby employs Employee and
Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth. Subject to the provisions for termination as hereinafter
provided, Employee's term of employment by the Company shall be from the date of
this agreement until August 31, 2000, and said employment shall continue after
such date until either party shall deliver written notice to the other party
hereto to the effect that the employment hereunder shall terminate thirty (30)
days from the giving of such notice. This Agreement will supersede all prior
written and oral agreements entered into by and between Company and Employee.

2. Services to be Rendered by Employee. Employee shall be subject to the
direction of the Board of Directors, or a duly authorized committee thereof and
his duties shall be those generally vested in the office of Chief Technology
Officer for the corporation and he shall have such other powers and duties as
may be reasonably prescribed by the Board of Directors, or a duly authorized
committee thereof, and shall perform such duties as from time to time may be
decided upon by the Board of Directors, or a duly authorized committee thereof,
of the Company, including but not limited to, speaking for and promoting the
sale of the Company's product lines as public spokesman both in print and
television ads. Employee shall devote a sufficient amount of his productive
time, energy and ability during the term of this Agreement to the proper and
efficient conduct of the Company's business during the term of this Agreement
however the Employee shall be only required to devote part time and attention to
the Company's business expected to range from approximately 15-30 hours per week
unless otherwise agreed by the parties.

Employee shall at all times faithfully, industriously, and to the best of his
ability, experience and talent, perform the duties that may be reasonably
required to the reasonable satisfaction of the Board of Directors.

As is the present case, Employee may from time to time work for other persons or
entities in any capacity, including but not limited to an officer, director,
employee or consultant, and conduct other business activities so long as such
work or activities do not adversely and directly impact on his duties and
obligations to the Company as has been reasonably performed in the past. The
Company acknowledges that Employee is an officer and director of Norris
Communications, Inc. and Patriot Scientific Corporation and has duties thereto.

3. Compensation.

(a) For the services to be rendered by Employee during his employment by the
Company, the Company shall pay Employee a Base Salary of eight thousand dollars
($8,000) per month during the term of this agreement, prorated for any partial
month and paid in conformity with the Company's normal payroll period.
Employee's salary shall be reviewed by the Board of Directors from time to time
in its discretion, and Employee will receive such salary increases, if any, as
the Board of Directors in its sole discretion determines.

(b) Employee shall be entitled to participate in any bonus pool, stock option
plan or similar program established by the Board of Directors.

(c) The Employee's place of employment shall be considered San Diego County,
California (or other mutually agreed upon location).

(d) Employee shall be entitled to participate in and receive benefits under the
Company's executive benefits plans as in effect from time to time, including
auto, medical insurance, sick leave, and vacation time, subject to and on a
basis consistent with the terms, conditions and overall administration of such
plans and Company policies.

(e) The Company shall pay or reimburse Employee for all expenses normal
reimbursed by the Company and reasonably incurred by him in furtherance of his
duties hereunder and authorized by the Company, including without limitation,
expenses for entertainment, traveling, meals, hotel accommodations and the like
upon submission by him of vouchers or an itemized list thereof as the Board of
Directors; may from time to time adopt and authorize, and as may be required in
order to permit 


                                                                               1

<PAGE>   2
such payments as proper deductions to the Company under the Internal Revenue
Code of 1986 and the rules and regulations adopted pursuant thereto now or
hereafter in effect.

(f) All amounts payable or which become payable under any provision of this
Agreement will be subject to any deductions authorized in writing by you and any
deductions and withholdings required by law.

4. Indemnification.

(a) If, after the date of the commencement of the Employment Period, the
Employee is made a party or is threatened to be made a party to any action, suit
or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director or officer of
the Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation or partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is an alleged act or
failure to act in an official capacity as a director, officer, member, employee
or agent, he shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Employee in connection
therewith, including, without limitation, payment of expenses incurred in
defending a Proceeding prior to the final disposition of such Proceeding
(subject to receipt of an undertaking by the Employee to repay such amount if it
shall ultimately be determined that the Employee is not entitled to be
indemnified by the Company under Delaware law), and such indemnification shall
continue as to the Executive even if he has ceased to be a director, officer,
member, employee or agent of the Company or other enterprise and shall inure to
the benefit of his heirs, executors and administrators.

(b) The right of indemnification and the payment of expenses incurred in
defending a Proceeding in advance of its final disposition conferred in this
Section 4 shall not be exclusive of any other right that the Employee may have
or hereafter may acquire under any statute, provision of the Certificate of
Incorporation or Bylaws of the Company, agreement, vote of shareholders or
disinterested directors or otherwise.

5. Termination of Employment.
(a) The Company shall have the right at its option to terminate the employment
of Employee hereunder by giving written notice thereof to the Employee in the
event of any of the following:

        (1) If the Board of Directors of the Company, or a duly authorized
        committee thereof, acting in good faith and upon reasonable grounds,
        determines that the Employee should be terminated for Cause. For
        purposes of this Agreement, "Cause" means, in each case as determined in
        good faith by the Board, Employee's (i) personal dishonesty, willful
        misconduct, or breach of fiduciary duty involving personal profit,
        and/or (ii) conviction of any felony law, and/or (iii) a determination
        or request by an appropriate regulatory authority that Employee be
        removed or disqualified from acting as an officer of the Company, and/or
        (iv) willful breach of a material provision of this Agreement after
        written notice, in reasonable detail as the alleged breach, has been
        given to you by the Board and you have had a reasonable opportunity to
        cure such breach. Notwithstanding the foregoing, the Employee shall not
        be deemed to have been terminated for Cause unless and until there shall
        have been delivered to the Employee (i) a copy of a resolution, duly
        adopted by the Board (excluding the Employee) at a meeting of the Board
        called and held for the purpose (after reasonable notice to the Employee
        of the meeting of the Board at which the motion is to be considered,
        which notice shall specify in reasonably detailed terms the facts and
        circumstances constituting Cause, and after the Employee, together with
        his counsel, having been afforded at such meeting an opportunity to be
        heard before the Board), finding that the Employee was guilty of conduct
        constituting Cause; (ii) a certificate of the Secretary or an Assistant
        Secretary of the Company stating that such resolution was in fact duly
        adopted by the Board (excluding the Employee); and (iii) a Notice of
        Termination in the form specified in the following sentence. A Notice of
        Termination shall indicate the specific termination provision in this
        Agreement relied upon and set forth in reasonable detail the facts and
        circumstances of the Employee's employment under the provision so
        indicated and the actual termination effective date.

        (2) If the Company gives Employee thirty days advance written notice of
        termination of employment.

        (3) If the Employee dies during the term of employment, the Employee's
        employment hereunder and Employee's compensation and other rights under
        this Agreement and as an employee of the Company (except as to
        compensation rights accrued prior thereto and except as expressly
        provided in the next succeeding sentence) shall terminate thirty (30)
        days following the date of death. In such event, the Company shall pay
        to the Employee's designated executor 


                                                                               2

<PAGE>   3
        or administrator of the Employee's estate, all compensations and
        benefits accrued which would otherwise be payable to the Employee
        through the thirtieth (30) day following the date of death.

        (4) If the Employee is unable for any reason to carry out or to perform
        the duties required of him hereunder and does not resume his duties
        prior to the termination date specified in the Company's written notice
        of termination; provided, however, if the Employee shall fail to carry
        out or to perform the duties required of him because of mental or
        physical disability for a six consecutive month period during the term
        hereof and following such period he is unable to perform his duties
        hereunder because of mental or physical disability, as determined by the
        Board of Directors of the Company, or a duly authorized committee
        thereof, acting in good faith and upon reasonable grounds, he shall be
        entitled to receive his then Base Salary he would otherwise be entitled
        to hereunder during the term of this Agreement pursuant to Paragraph 3
        hereof for a period of not longer than twelve (12) months after the
        termination of his employment pursuant to this Paragraph 5(a) (4).

        (5) If this Agreement is terminated by the Company pursuant to Paragraph
        5(a)(2) hereof, then Employee shall be entitled to severance payments
        equal to twelve (12) months of his then monthly Base Salary and any
        bonus on an as if perfected basis payable in one lump sum within thirty
        (30) days after such effective termination of Employee's employment by
        the Company irrespective of the remaining term of this agreement. Any
        vested stock options shall also be exercisable in accordance with their
        terms for the duration of the original option agreement term
        irrespective of any contrary provisions in the option agreement.


(b) The Employee shall have the right at his sole option to terminate employment
hereunder under the following conditions:

        (1) at any time upon thirty (30) days written notice.

        (2) upon written notice by Employee to the Company within thirty (30)
        days of and indicating that a change in control of the Company
        ("Corporate Transaction") has occurred and therefore Employee elects to
        terminate as provided herein. A Corporate Transaction of the Company
        shall mean a change in control of a nature that would be required to be
        reported in response to Item 5(f) of Schedule 14A of Regulation 14A
        promulgated under the Securities Exchange Act of 1934, as amended (the
        "Exchange Act"); provided that, without limitation, such a change in
        control or other qualifying event shall be deemed to have occurred if
        (i) any "person" (as such term is used in Sections 13(d) and 14(d) of
        the Exchange Act) is or becomes the "beneficial owner" (as defined in
        Rule 13d-3 under the Exchange Act), directly or indirectly, of
        securities of the Company representing 50% or more of the combined
        voting power of the Company's then outstanding securities; or (ii) the
        Company sells, transfers or otherwise disposes of all or substantially
        all of the assets of the Company; or (iii) a merger or acquisition in
        which the Company is not the surviving entity (except for a merger into
        a wholly-owned subsidiary, and except for a transaction the sole purpose
        of which is to change domicile.

        (3) if termination by the Employee is pursuant to 5 (b) (1) then no
        severance or termination payments shall be payable. If termination is
        noticed pursuant to 5 (b) (2) hereof then Employee shall be entitled to
        a payment equal to the remaining months of this Agreement multiplied by
        the Base Salary and any bonus on an as if perfected basis payable in one
        lump sum within sixty (60) days. In addition, the Employee shall be
        entitled to recover legal fees and costs incurred by Employee should the
        Company not make timely payment prescribed by this section and should
        the Employee prevail in any action filed thereabout.

6. Soliciting Customers. The Employee agrees that he will not for a period of
one (1) year immediately following the termination of his employment with the
Company, either directly or indirectly make known to any competing person, firm,
or corporation the names or addresses of any of the customers of the Company or
any other information pertaining to them that is not in the public domain.

7. Trade Secrets of the Company. The Employee prior to and during the term of
employment under this Agreement has had and will have access to and become
acquainted with various trade secrets, consisting of devices, secret inventions,
processes, and compilations of information, records, and specifications which
are owned by the Company, and which are regularly used or to be used in the
operation of the business of the Company. The Employee shall not disclose any of
the aforesaid trade secrets, directly or indirectly, or use them in any way,
either during the term of this agreement or for a period of 36 months
thereafter, except as required in the course of his employment. All files,
records, documents, drawings, specifications, equipment, and similar items
relating to the business of the Company, whether prepared by the Employee or
otherwise coming into his possession, shall remain the exclusive property of the
Company and shall not be removed under any 


                                                                               3

<PAGE>   4
circumstances from the premises of the Company where the work is being carried
on without prior written consent of the Company or consistent with the Company's
normal business practices.

8. Inventions and Patents. The Employee agrees that as to any inventions made by
him during the term of his employment, solely or jointly with others, which are
made using trade secret information of the Company or which relate at the time
of the conception or reduction-to-practice of an invention to the business of
the Company (which shall be limited to sound reproduction, sound attenuation,
global positioning and miniature radio technologies as currently practiced by
the Company) or the Company's actual or demonstrably anticipated research or
development as promulgated by the Board of Directors prior to any invention
thereof, or which result from any work performed by the Employee directly for
the Company at the Board of Directors direction, shall belong to the Company and
the Employee promises to assign such inventions to the Company. The Employee
also agrees that the Company shall have the right to keep such inventions as
trade secrets, if the Company chooses. The Employee agrees to assign to the
Company the Employee's rights in any such inventions where the Company is
required to grant those rights to the United States government or any agency
thereof.

The Employee shall assist the Company in obtaining such patents on all
inventions described above, and designs, improvements, and discoveries deemed
patentable by the Company in the United States and in all foreign countries, and
shall execute all documents and do all things necessary to obtain letters
patent, to vest the Company with full and extensive title thereto, and to
protect the same against infringement by others. In exchange for assignment of
any new patents to the Company, the Company and Employee shall negotiate a
royalty agreeement comparable to rates on prior assignments made to the Company
by Employee.

Employee has been an inventor for more than 30 years for his own account and for
a variety of entities and is responsible for developments for various entities.
Nothing in this Agreement is intended to restrict Employees outside activities
as an inventor other than as prescribed in this section. Accordingly, unless an
invention made by Employee relates to sound reproduction, sound attenuation,
global positioning and/or miniature radio technologies as currently practiced by
the Company, the presumption shall be that any such invention is not owned by
the Company without the written consent of Employee and the burden of proving
the invention is owned by the Company shall be that of the Company.

9. Severability. Each paragraph and subparagraph of this Agreement shall be
construed and considered separate and severable from the validity and
enforceability of any other provision contained in this Agreement.

10. Assignment. The rights of the Company (but not its obligations) under this
Agreement may, without the consent of the Employee, be assigned by the Company
to any parent, subsidiary, or successor of the Company; provided that such
parent, subsidiary or successor acknowledges in writing that it is also bound by
the terms and obligations of this Agreement. Except as provided in the preceding
sentence, the Company may not assign all or any of its rights, duties or
obligations hereunder without prior written consent of Employee. The Employee
may not assign all or any of his rights, duties or obligations hereunder without
the prior written consent of the Company.

11. Notices. All notices, requests, demands and other communications shall be in
writing and shall be defined to have been duly given if delivered or if mailed
by registered mail, postage prepaid: (a) If to Employee, addressed to him at the
following address as may be changed in writing from time to time:

        Elwood G. Norris
        13824 San Sebastian Way
        Poway, California 92064

(b) If to the Company, addressed to:

        American Technology Corporation
        13114 Evening Creek Dr. South
        San Diego, California 92128

or to such other address as any party hereto may request by notice given as
aforesaid to the other parties hereto.

12, Title and Headings. Titles and headings to paragraphs hereof are for
purposes of references only and shall in no way limit, define or otherwise
affect the provisions hereof.

13. Governing Law. This Agreement is being executed and delivered and is
intended to be performed in the State of California, and shall be governed by
and construed in accordance with the laws of the State of California.


                                                                               4
<PAGE>   5
14. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be necessary
in making proof of this Agreement to produce or account for more than one
original counterpart.

15. Cumulative Rights. Each and all of the various rights, powers and remedies
of the Company and Employee in this Agreement shall be considered as cumulative,
with and in addition to any other rights, powers or remedies of the Company or
the Employee and no one of them as exclusive of the others or as exclusive of
any other rights, powers and remedies allowed by law. The exercise or partial
exercise of any right, power or remedy shall neither constitute the election
thereof nor the waiver of any other right, power or remedy. Sections 4, 6, 7 and
8 hereof shall continue in full force and effect notwithstanding the Employee's
termination of employment and the termination of this Agreement.

16. Remedies. The Employee and the Company both acknowledge that each may have
no adequate remedy at law if either violates any of the terms contained in
Sections 6, 7 and 8. In such event, either party shall have the right, in
addition to any other rights it may have, to obtain relief to restrain any
breach hereof or otherwise to specifically enforce any of the provisions hereof.

17. Waiver of Breach. The waiver by one party to this Agreement of a breach of
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the said party .

18. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto and may be modified or amended only by a written instrument
executed by parties hereto. Effective on the date hereof, any prior employment
agreements between the Company and the Employee shall terminate.

19. Attorney's Fees. In the event that either party must institute legal action
to compel the other to comply with the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees and costs.

20. Good Faith. Each of the parties hereto agrees that he or it shall act in
good faith in all actions taken under this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.


/s/ Richard M. Wagner                              August 28, 1997
-----------------------------
American Technology Corporation
Richard M. Wagner, Secretary


/s/ Elwood G. Norris                               August 28, 1997
-----------------------------
Elwood G. Norris, Employee


                                                                               5